the made whole doctrine in all 50 states - Insurance Litigation ...

THE MADE WHOLE DOCTRINE
IN ALL 50 STATES
MATTHIESEN, WICKERT & LEHRER, S.C.
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©2008
Last Updated 11/26/2008 1

THE MADE-WHOLE DOCTRINE GENERALLY
The made-whole doctrine is an equitable defense to the subrogation or reimbursement rights of
a subrogated insurance carrier or other party, requiring that before subrogation and/or
reimbursement will be allowed, the insured must be made whole for all of its damages. Precisely
what being “made whole” means varies from state to state, but the concept is nonetheless fairly
similar in each state. A well-respected legal treatise defines the made-whole doctrine as follows:
It is widely held that in the absence of contrary statutory law or valid contractual obligation
to the contrary, the general rule under the doctrine of equitable subrogation is that
whether an insured is entitled to receive recovery for the same loss from more than one
source, e.g., the insurer and the tortfeasor, it is only after the insured has been fully
compensated for all the loss that the insurer acquires a right to subrogation.
Subrogation’s long and storied history had its common law roots in the law of equity – the courts
of Chancery in England. Subrogation was established well before the law of quasi-contract at
common law. This means that subrogation, even today, can arise without an insurance policy or
statute giving an insurer a right of subrogation or reimbursement – so-called “equitable” or legal
subrogation. Modern jurists have tortured the modern concept of subrogation and frequently
overlaid the entire field of subrogation with an equitable blanket, requiring the application of
equitable defense and concepts, including the made-whole doctrine. Because subrogation and
reimbursement rights can arise by contract (insurance or contract policy terms) as well as by
statute (workers’ compensation, Medicare, Med Pay, etc.), it is perhaps either by mistake of
history or as a result of jurisprudential laziness that modern courts carry forward the antiquated
and somewhat illogical premise and precedent that all subrogation is equitable and therefore
subject to equitable defenses such as the made-whole doctrine. In fact, some states, assessing
their state’s own workers’ compensation laws which statutory require reimbursement of the
employer when there is a third party recovery, have even played the made-whole card when
subrogation isn’t even involved – merely a statutory right of reimbursement.
Although equitable subrogation rights are independent of and quite different from any
contractual relationship or terms between two parties, courts have blurred the distinction
between the two and hampered their ability to contract freely with regard to the rights between
them in accordance with the law and their intent. A growing number of states have now begun
to recognize the difference between the two, holding that parties can contract around the made
whole doctrine if that intent is clear from the contract.
As a result of the foregoing, states are split as to whether, when, and how to apply the madewhole
doctrine generally, and whether the equitable doctrine should be applied when
contractual subrogation is involved. The made-whole doctrine’s far-reaching tentacles affect
virtually every line of subrogation and in a myriad of ways. Understanding a particular state’s
made-whole laws is vital to a successful subrogation result. The made-whole doctrine remains
the number one adversary of the subrogation industry, and no other fundamental equitable
principle is as poorly understood as the inner workings and applicability of this defense to
subrogation.
When an insured is not fully reimbursed for all of its losses, there is a split of authority among
the various states as to whether the insurer or the insured has a superior interest in the third
party recovery. Four outcomes are possible:
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1. Insurer Whole Plus: The insurer is the sole beneficial owner of the claim against the third
party and is entitled to the full amount recovered, whether or not it exceeds the amount
paid by the insurer to the insured.
2. Insurer Whole: The insurer is to be reimbursed first out of the recovery from the third
party and the insured is entitled to any remaining balance.
3. Proration: The recovery from the third person is to be prorated between the insurer and
the insured in accordance with the percentage of the original loss for which the insurer
paid the insured under the policy.
4. Insured Whole: Out of the recovery from the third party the insured is to be reimbursed
first, for the loss not covered by insurance, and the insurer is entitled to any remaining
balance, up to a sum sufficient to reimburse the insurer fully, the insured being entitled to
anything beyond that amount.
5. Insured Whole Plus: The insured is the sole owner of the claim against the third party
and is entitled to the full amount recovered, whether or not the total thus received from
the third party and the insurer exceeds his loss. 1
In general, the courts have avoided rules one and five. Also, very few courts have applied the
proration formula, leaving most states falling between rule numbers two 2 and four. 3 A few states
have not directly addressed or applied the traditional made whole rule or applied it to all lines of
insurance subrogation.
The following is a compilation of summaries of the law in all 50 states with regard to the madewhole
doctrine and its applicability to subrogation generally.
ALABAMA
THE MADE-WHOLE DOCTRINE IN ALL 50 STATES 4
The Alabama Supreme Court first adopted the made whole doctrine in 1989 in the case of
Underwriters/Brokers, Inc. v. Liao. 5 Where contractual subrogation rights existed, however, the
Court said that parties are free to contract around the made whole doctrine, as long the contract
1 Robert A. Keeton, Basic Text On Insurance Law, § 3.10(c)(2) at 160-62 (1971).
2 Alabama, Arkansas, Colorado, Connecticut, Florida, Illinois, Indiana, Iowa, Louisiana, Maine,
Massachusetts, Michigan, Minnesota, Mississippi, Montana, New Jersey, North Carolina, Rhode Island,
Tennessee, Texas, Utah, Vermont, Washington, West Virginia, and Wisconsin are examples of states
which follow rule number 2.
3 California, Idaho, Nebraska, Ohio, Virginia, and Wyoming follow rule number 4.
4 Notice: State law regarding the application and documentation of future credits, like any other aspect of
government, can change without notice and for seemingly no reason at all. That means that this
publication and its contents could become obsolete without notice to the user or the author. The contents
of this publication don’t constitute legal advice, which can only be dispensed within the confines of the
attorney/client relationship. To verify the accuracy and applicability of any of the forms or procedures
referenced herein, it is advised that you engage and consult with subrogation counsel. MWL recognizes
the extensive law review article on this subject entitled, The Made Whole Doctrine: Unraveling The
Enigma Wrapped In The Mystery Of Insurance Subrogation, authored by Professor Johnny C. Parker at
the University of Tulsa College of Law, on which we relied for much of our research. Johnny Parker, The
Made Whole Doctrine: Unraveling The Enigma Wrapped In The Mystery Of Insurance Subrogation, 70
Mo. L. Rev. 723 (2005).
5 Int’l Underwriters/Brokers, Inc. v. Liao, 548 So.2d 163 (Ala. 1989).
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“expressly provides” that the made whole doctrine will not apply. One year later, this decision
was overturned when Alabama became home to one of the classic made whole decisions in all
of American jurisprudence. 6 In Powell v. Blue Cross, the Alabama Supreme Court held that a
health Plan was not entitled to subrogation rights until the insured had been “made whole” for all
elements of damages. The made whole doctrine was applied to both rights of reimbursement
and subrogation, and the court looked at whether or not the Plan beneficiary had been
completely compensated for all of his damages. In 1999, this line of decisions was again
affirmed by the Alabama Supreme Court. 7 However, the affirmation was short-lived.
In 2000, the Alabama Supreme Court flip-flopped once more, overruling this line of decisions as
being unjust. 8 In a well-reasoned decision, the Alabama Supreme Court did what a number of
states in this country are failing to do - it recognized the difference between legal/equitable
subrogation and conventional/ contractual subrogation. The Court was motivated by its
perception of the “inequitable consequences that can result from a strict application of the
‘made-whole’ doctrine without regard to the express desires of the insured or the type of
insurance involved.” 9 The decision overturned Powell and reinstated Liao as the rule in
Alabama. In order to prevent the tortfeasor from escaping a wrongdoing, the court held that the
normal equitable rules of subrogation could be modified by contract. 10 In Wolfe v. Alfa Mutual
Ins. Co., the court discussed precisely what sort of language was sufficient to override the made
whole doctrine. The Court in Wolfe totally rejected the idea that in order to override the made
whole doctrine, the insurance contract must specifically mention “made whole” and negate it.
Instead, they indicated that the policy must only provide a statutory scheme “contrary to
established equitable principles.” 11 In Wolfe, the policy at issue contained the following
language:
“…if [insurer] makes a payment to its insured, and if that insured has a right to recover
damages from another, [insured] shall be subrogated to that right.”
The Court held that this language alone merely gave Alfa a subrogation right but did not rise to
the level of “expressly providing” that made whole was overruled. However, the policy in Wolfe
also contained the following language:
“[I]f [insurer] makes a payment under this policy and [insured] recovers damages from
another, [insured] shall hold in trust for [insurer] the proceeds of the recovery and shall
reimburse [insurer] to the extent of [insurer’s] payment, costs and fees.”
This language was sufficient to “expressly provide” for the abrogation of the made whole rule. 12
Therefore, in Alabama, equitable principles denying subrogation until the insured has been
made whole apply to all instances of subrogation except those where a contract expressly
provides otherwise. 13 Undoubtedly, the future of Alabama litigation will be fought over whether
and to what extent the language “expressly provides” that the equitable made whole doctrine
6 Powell v. BlueCross & BlueShield of Ala., 581 So.2d 772 (Ala. 1990).
7 Ex parte Black, 734 So.2d 998 (Ala. 1999).
8 Ex parte State Farm Fire & Cas. Co. v. Hannig, 764 So.2d 543 (Ala. 2000).
9 Id.
10 Id; Wolfe v. Alfa Mut. Ins. Co., 880 So.2d 1163 (Ala. Civ. App. 2003).
11 Id. at 1167.
12 Id. at 1167-68.
13 Allstate Ins. Co. v. Fugh Cole Builder, Inc., 772 So.2d 1145 (Ala. 2000); Int’l Underwriters/Brokers, Inc.
v. Liao, 548 So.2d 163 (Ala. 1989); Ex parte Cassidy, 772 So.2d 334 (Ala. 2000).
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does not apply. It should be noted that only the insured has standing to assert the made whole
doctrine. 14 In determining whether the insured has been made whole, the court must consider
every payment made to, or on behalf of, the insured which arises out of the loss sustained, but
should not consider attorney’s fees. 15
ALASKA
Alaska law is sparse with regard to the made whole doctrine. However, Alaska law appears to
support the proposition that mere equitable subrogation will not be allowed unless an insured
has been fully compensated for its loss. 16 Interestingly, the concept of “made whole” was first
and only discussed with regard to workers’ compensation subrogation which, unlike many other
lines of insurance subrogation, is statutory in nature.
ARIZONA
Arizona law does not discuss application of the made whole doctrine in the subrogation context.
It does mention and apply the somewhat similar doctrine of superior equities in a suretyship
situation, however. 17 The 9 th Circuit (which includes Arizona) has adopted the made whole
doctrine into federal common law as the default rule with regard to health insurance
subrogation. 18 Therefore, under federal common law in the 9 th Circuit, absent language to
contrary in the Plan, a health Plan cannot enforce its subrogation rights unless the Plan
beneficiary is fully compensated and made whole for his or her injuries. 19 Of course, that deals
with federal law.
Note, however that with regard to Med Pay subrogation, § 20-259.01(J) requires an insurer to
compromise its Med Pay lien in a “fair and equitable manner.”
ARKANSAS
Subrogation in Arkansas had its roots in property subrogation. 20 Arkansas first applied the made
whole doctrine in the 1997 Arkansas Supreme Court decision of Franklin v. Healthsource of
Arkansas. 21 Several years before Franklin extended the made-whole requirement to all personal
injury cases, the court had actually cautioned against doing so. 22 In American Pioneer Life
Insurance Co. v. Rogers it predicted that the made-whole requirement would rarely be met in
the personal injury context. It was right.
The Arkansas Supreme Court has applied the made-whole doctrine despite the insured’s
express assignment of a tort recovery to insurer in an insurance policy. 23 It feels that any
attempt to enforce the “literal language” of such an assignment “ignores the fact that this type of
14 Nationwide Prop. & Cas. Ins. Co. v. DPF Architects, P.C., 792 So.2d 369 (Ala. 2000).
15 Powell v. BlueCross & BlueShield of Ala., 581 So.2d 772 (Ala. 1990), overruled on other grounds, Ex
parte State Farm & Cas. Co. v. Hannig, 764 So.2d 543 (Ala. 2000).
16 McCarter v. Alaska Nat’l Ins. Co., 83 P.2d 986 (Alaska 1984).
17 Liberty Mutual Insurance Company v. Thunder Bank, 555 P.2d 333 (Ariz. 1976).
18 Barnes v. Indep. Auto Dealers Ass’n of Cal. H&W Ben. Plan, 64 F.3d 1389 (9 th Cir. 1995).
19 Id.
20 American Pioneer Life Ins. Co. v. Rogers, 753 S.W.2d 530 (Ark. 1988).
21 Franklin v. Healthsource of Ark., 942 S.W.2d 837 (Ark. 1997).
22 American Pioneer Life Ins. Co. v. Rogers, supra.
23 Id.
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contract is realistically a unilateral contract of insurance and overlooks the insured’s total lack of
bargaining power in negotiating the terms of these types of agreements.” 24 Since Franklin,
Arkansas courts have not once ruled that a personal injury victim has been made whole. 25
Therefore, the right to subrogation in personal injury cases in Arkansas appears to exist in name
only, and insurers' attempts to assert their subrogation rights, even subrogation rights granted
by statute, have been futile. The Rogers court stated that the types of damages suffered in
personal injury cases, which can include lost wages, pain and suffering, and “intangible losses,”
are often “not susceptible to exact measurement.” The difficulty in quantifying such losses,
which are not covered by insurance, is likely the reason why no Arkansas court since Franklin
has ruled that a personal injury victim was “made whole.” Though Arkansas courts have not
formally rejected subrogation in the personal injury context, the way the courts have applied the
made-whole doctrine makes subrogation recoveries for insurers nearly impossible.
Arkansas’ strict application of the made-whole doctrine has even led that state to apply the
doctrine in the context of workers’ compensation subrogation. 26 The test is whether the
reimbursement (third party recovery plus insurance proceeds which exceed the insured’s loss
and collection costs).
CALIFORNIA
The made whole doctrine has been viable in California since 1974. 27 In Ingebretsen, multiple
insureds recovered insurance proceeds for damages caused to their property by the County of
Los Angeles. Each policy contained a standard subrogation clause allowing the company to
“require from the insured an assignment of all right of recovery against any part for loss to the
extent that payment therefore is made by [the] company”, as allowed by § 2071 of the California
Insurance Code. 28 The insureds also executed a subrogation receipt or release,
acknowledgment of satisfaction, agreement to immediate cancellation and assignment of
subrogation document contemporaneously with receiving the insurance proceeds. After a
dispute over third party proceeds, the court concluded that where the subrogation provision and
subrogation assignment convey “all right of recovery against any party for loss to the extent that
payment therefore is made by this company,” this entitles the insurer to first and total
indemnification. The insurer's priority of right however was conditioned on it having cooperated
and assisted in the recovery from the third party.
The insureds in Ingebretsen further contended that the insurers were not entitled to recovery
because it was impossible to ascertain what portion of the judgment represented damages paid
for by the companies. According to the insureds, a portion of the judgment against the county
was for noninsured losses, and consequently, the insurers should be denied recovery unless
they could prove what portion of the judgment was attributable to covered losses. The court,
again relying on the all right of recovery language contained in the subrogation clause,
concluded that all claims of the insureds had been transferred to the insurers. Therefore,
insurers were not required to prove what portion of the judgment was attributable to covered
losses.
24
Id.
25
Perry, Is The Made-Whole Requirement More Than We Bargained For?, 60 Ark. L. Rev. 295 (2007).
26
S. Cent. Ark. Elec. Coop. v. Buck, 117 S.W.3d 591, 594-96 (Ark. 2003); Travelers Ins. Co. v. O'Hara,
84 S.W.3d 419, 421 (Ark. 2002).
27
Travelers Indem. Co. v. Ingebretsen, 113 Cal. Rptr. 679 (Cal. App. 1974).
28
Ann. Cal. Ins. Code § 2071 (2005).
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The Ingebretsen rule applies only narrowly to the sort of facts contained in that case. In
Sapiano, 29 the court concluded that in contrast to the policy and insurer in Ingebretsen, (1) the
language of the subrogation clause in Sapiano contained general terms, and (2) the insurer did
not cooperate or assist the insured in its efforts to recover from the tortfeasor. As a result, the
insured retained priority of right and was entitled to be made whole before the insurer could
assert its right to subrogation. Like Alabama, California adheres to the view that the parties are
free to agree that the made whole rule does not apply. However, unlike Alabama, which
imposes only one condition (i.e., that the agreement be sufficiently specific), California imposes
an additional requirement that the insurer cooperate and assist the insured in the recovery. 30
California, as does Alabama, recognizes the potential harsh and one-sided effect of expanding
the principle of conventional subrogation. California courts hold that, in the absence of specific
language to contrary, a general provision that an insurer is subrogated to the rights of an
insured does not permit the insurer to recover from third party tortfeasor until the insured has
been made whole. 31 The court also observed that where the insured does not assist in
prosecution of the claim, the insured may not be permitted to recover until insured has been
made whole.
As applied in California, the made whole doctrine generally precludes an insurer from
recovering any funds from the tortfeasor unless and until the insured has been made whole for
the loss. 32 However, the doctrine applies only when there is no agreement to the contrary. 33 The
applicability of the doctrine generally depends on whether the insured has been completely
compensated for all elements of damages, not merely those for which the insurer has
indemnified the insured. 34 However, one California court recently held for the first time that the
doctrine applies in a personal injury (reimbursement) context under no-fault Med-Pay insurance
coverage. 35 Even more recently, California held that in the Med-Pay context, the insured’s
attorney’s fees should not be subtracted in order to determine if he or she was made whole. 36
Although California recognizes the made whole doctrine, it doesn’t apply it as a blanket rule. 37
The made whole doctrine appears to be applied only in cases where the carrier elects not to
participate in its insured’s third party action. Therefore, the made whole rule is inapplicable
when the insurer funds or actively participates in the prosecution of the claim against the third
party. 38
29 th
Sapiano v. Williamsburg Nat’l Ins. Co., 28 Cal. App.4 533 (1994).
30
Id.
31
Id.
32
Progressive West Ins. Co. v. Yolo County Superior Court, 37 Cal.Rptr.3d 434 (Cal. App. 2005); Barnes
v. Independent Automobile Dealers of Cal., 64 F.3d 1389 (9 th Cir. 1995).
33 th
Barnes, supra; Samura v. Kaiser Foundation Health Plan, 17 Cal. App.4 1284 (Cal. App. 1993).
34 th
Allstate Ins. Co. v. Superior Court, 151 Cal.App.4 1512 (Cal. App. 2007) (writ granted by California
Supreme Court on September 25, 2007); Some jurisdictions have narrowly construed the made-whole
exception as referring only to an insured being fully compensated for the covered losses; see e.g., Ludwig
v. Farm Bureau Mut. Ins. Co., 393 N.W.2d 143 (Iowa 1986).
35
Progressive West, supra.
36
Allstate Ins. Co. v. Superior Court, supra.
37
Chase v. Nat’l Indem. Co., 129 Cal. App.2d 853 (1950); Sapiano v. Williamsburg Nat’l Ins. Co., 28 Cal.
App.4 th 533 (1994); Chong v. State Farm, 428 F. Supp.2d 1136 (S.D. Cal. 2006).
38
Travelers Indem. Co. v. Ingebretsen, 38 Cal.App.3d 858 (Cal. App. 1974); Malibu Broadbeach, L.P. v.
State Farm, 2008 WL 588998 (Cal. App. 2008).
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In Samura v. Kaiser Foundation Health Plan, the court responded to a concern about the onesidedness
of negotiating insurance contracts by suggesting that the doctrine of
unconscionability could be used to counter this problem. 39 That court stated:
In short, the third party liability provision may sometimes operate in a harsh and one-sided
manner without any justification, which raises the possible application of the doctrine of
unconscionability. As embodied in Civil Code section 1670.5, subdivision (a), the concept
of unconscionability has both a ‘procedural’ and a ‘substantive’ element. ‘The former
includes (1) ‘oppression,’ which refers to an inequality of bargaining power resulting in no
real negotiation and the absence of meaningful choice; and (2) ‘surprise,’ which occurs
when the supposedly agreed-upon terms of the bargain are hidden in a prolix printed form
drafted by the party seeking to enforce the disputed terms .... ‘Substantive’
unconscionability consists of an allocation of risks or costs which is overly harsh or onesided
and is not justified by the circumstances in which the contract is made....
Presumably both procedural and substantive unconscionability must be present before a
contract will be held unenforceable. However, a relatively larger degree of one will
compensate for a relatively smaller degree of the other.'
With regard to uninsured motorist subrogation, California has indicated that the subrogee
insurance company has priority of rights and is entitled to subrogation even if the insured is not
made whole. 40
The made whole doctrine applies equally to both subrogation and reimbursement causes of
action. 41 California makes specific note of the fact that subrogees who “sit back without
assisting” while the insured prosecutes the third party action will not be able to recover unless
the insured is fully made whole. 42 This means that, where applicable, the made whole doctrine
prohibits a carrier from subrogation or reimbursement unless there is a surplus resulting from
the insured’s receipt of both insurance benefits and tort damages. 43 For years, this meant the
carrier could not recover until the insured recouped his loss and some or all of his litigation
expenses incurred in the lawsuit – including his attorney’s fees. 44 However, as of 2007, the
California Court of Appeals decision in Allstate Ins. Co. v. Superior Court, attorney’s fees and
costs are not to be deducted from the insured’s third party recovery before comparing the
damages sustained by the insured and amount of the third party recovery to determine if the
insured was “made whole”. 45
COLORADO
The made whole doctrine was first introduced and accepted in Colorado in the limited context of
uninsured motorist coverage in 1989. 46 In the same case, the Colorado Supreme Court
answered the question of whether a conventional subrogation provision in a policy can displace
39 th
Samura v. Kaiser Foundation Health Plan, Inc., 17 Cal. App.4 1284 (Cal. 1993).
40
Sapiano, supra.
41
Progressive West Ins. Co. v. Yolo County Superior Court, supra.
42
Samura, supra.
43 th
Hodges v. Kirkpatrick Development, Inc., 130 Cal.App.4 540 (Cal. App. 2005).
44
Id; Chong v. State Farm, 428 F. Supp.2d 1136 (S.D. Cal. 2006).
45 th
Allstate Ins. Co. v. Superior Court, 151 Cal.App.4 1512 (Cal. App. 2007), (writ granted by California
Supreme Court on September 25, 2007), rev. granted and opinion superseded by 67 Cal.Rptr.3d 178
(Cal. 2007).
46
Kral v. American Hardware Mutual Ins. Co., 784 P.2d 759 (Colo. 1989).
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the made whole rule. Within that limited context, the court determined that any subrogation
clause was unenforceable to the extent that it would impair the ability of the insured to be made
whole. 47 Other than that, Colorado courts have not made any direct pronouncements regarding
the doctrine’s application.
Up until July 1, 2003, Colorado had no-fault legislation. 48 For policies written on or after July 1,
2003, the no-fault law will no longer apply. Personal Injury Protection-type coverage will still be
allowed, but such offerings will be governed by the specific contract terms between the parties,
and not by the Colorado No-Fault Law. Until the repeal of Colorado’s No-Fault Act, Colorado
had held that the No-Fault Act evidenced a legislative intent “to allow an insured full tort
recovery undiminished by a subrogation and arbitration right of its insurer, except in those cases
where a policy would result in a double recovery to the insured.” 49
CONNECTICUT
Until recently, the made whole doctrine had not been applied outside the context of a
bankruptcy proceeding in Connecticut. 50 However, the Connecticut Supreme Court has given us
a clue as to how it will treat this issue in the future. The court has held that while a right of true
equitable subrogation may be provided for in a contract, the exercise of that right will have its
basis in general principles in equity, rather than in the contract, which will be treated as merely a
declaration of the principles of law already existing. 51 Nonetheless, Connecticut case law
intimates that the made whole doctrine can be overridden by contract terms in a Plan or policy
and the courts will allow these contract terms to override the application of this equitable
doctrine. 52 In action for reimbursement of monies paid out on policy of collision insurance, the
court held that the insurer had the burden of proving that the judgment recovered by the insured
included compensation for property damage and that as a result insurer was entitled to recover,
either on unjust enrichment theory or on theory that insured had violated his contract by refusing
to cooperate with insurer in effecting recovery. 53 Other than that, Connecticut doesn’t directly
address the made whole doctrine.
The Connecticut Supreme Court has rejected the argument that a subrogation clause
authorized by a Connecticut statute provides an insurer with “an inviolate right” to bring a
subrogation action, noting that contractual terms “may be ‘trumped’ by principles of equity,” and
adding that “under traditional principles of subrogation, if an insured brings an action against a
negligent party, an insurer generally is entitled to recover the amount it paid to the insured only
if the amount of damages awarded exceeds the difference between the amount the insurer paid
and the insured’s actual damages.” 54 The made whole doctrine applies whether the right of
subrogation is contractual or equitable. Also, the legislative language creating the standard form
fire insurance policy, which reads “[t]his Company may require from the insured an assignment
47
Id.
48
C.R.S. § 10-4-701, et seq.
49
Marquez v. Prudential Prop. & Cas. Ins. Co., 620 P.2d 29 (Colo. 1980); BlueCross of Western New
York v. Bukuimez, 736 P.2d 834 (Colo. 1987).
50
In re DeLucia, 261 B.R. 561 (Banc. Ct. 2001).
51
Wasko v. Manella, 849 A.2d 777 (Conn. 2004).
52
The Auto. Ins. Co. of Hartford v. Conlon, 216 A.2d 828, 829 (Conn. 1966).
53 Id.
54 Wasko, supra.
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of all right of recovery against any party for loss to the extent that payment therefore is made by
this Company,” 55 does not create such a right in the context of fire insurance. 56
DELAWARE
The 3 rd Circuit, in which Delaware sits, has been reluctant to apply the made whole doctrine,
especially where the Plan language specifically and unambiguously disclaims it. 57 As for state
law, however, Delaware contains no cases applying, extending, or explaining the application of
the made whole doctrine within Delaware state courts.
DISTRICT OF COLUMBIA
The “made whole doctrine” provides that if an insurer pays less than the insured’s total loss, the
insurer cannot exercise a right of reimbursement or subrogation until the insured has been
compensated for his entire loss. 58 The District of Columbia is sensible in applying the made
whole doctrine as a “default rule.” 59 This means that parties to an insurance policy can “contract
out of” the made whole doctrine by inserting sufficient language which clearly indicates the
intent of the parties to avoid the effect of the made whole doctrine. 60
FLORIDA
The Florida Supreme Court has acknowledged the application of the made whole rule in Florida
going back as far as 1979:
“Using the common law subrogation principle, endorsed by Florida courts, the District
Court reasoned that the insured was entitled to be made whole before the subrogated
insurer could participate in the recovery from a tortfeasor.” 61
Court rules that equitable principles such as the “made whole” doctrine apply even when the
subrogation is based on contract, except as modified by specific provisions in the contract. 62 “In
the absence of specific terms to the contrary, the insured is entitled to be made whole before
the insurer may recover any portion of the recovery” from the tortfeasor. 63
GEORGIA
The Georgia Supreme Court has held that the “made whole” rule reflects state policy that
“overrides the parties’ freedom of contract” and therefore that a provision in an insurance
contract that required an insured to reimburse the insurer with proceeds from a tort recovery
55 Conn. Gen. Stat. § 38a-307 (2003).
56
Wasko, supra.
57 rd
Bill Gray Enter., Inc. Emp. Health & Welfare Plan v. Gourley, 248 F.3d 206 (3 Cir. 2001).
58
District No. 1 - Pacific Coast Distributors v. Travelers Cas. & Surety Co., 782 A.2d 269 (D.C. 2001).
59
Id.
60
Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. Riggs Nat’l Bank of Wash., D.C., 646 A.2d 966 (D.C.
1994).
61 Ins. Co. of N. Am. v. Lexow, 602 So.2d 528 (Fla. 1992); see also Florida Farm Bureau Ins. Co. v.
Martin, 377 So.2d 827 (Fla. 1979).
62 Florida Farm Bureau Ins. Co. v. Martin, 377 So. 2d 827 (Fla. Dist. Ct. App. 1979).
63 Id.
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without regard to whether the insured had received complete compensation is unenforceable as
“violative of public policy.” 64
The made whole or “complete compensation rule” was applied for the first time in Georgia by
the 1997 Georgia Supreme Court decision of Duncan v. Integon General Insurance Co. 65 The
issue before the court in Duncan was whether the complete compensation or made whole rule
is applicable to an insurance policy provision which requires the insured to reimburse the insurer
the amounts paid under medical payments coverage The policy provision at issue in Duncan
provided:
“[i]f we make a payment under this policy and the person to or for whom payment is made
recovers damages from another, that person shall: (1) [h]old in trust for us the proceeds of
the recovery; and (2) reimburse us to the extent of our payment.”
According to the court, because the policy did not expressly address whether the made whole
rule would or would not operate as a limitation on the insured's right to complete compensation
it must be strictly construed against the insurer. As a result of the absence of an express
provision specifying that the made whole rule does not apply, the rule implicitly applies and
mandates complete compensation. The court in Duncan relied on two rationales for its holding.
First, the clear weight of authority recognizes that, in the absence of a provision to the contrary,
equity dictates that the insured be fully compensated for the loss covered by the policy. Second,
the court concluded that the public policy of Georgia supports the rule that an insurer may not
obtain reimbursement unless and until its insured has been completely compensated. The
Supreme Court noted that,
“[t]hese considerations of public policy and equitable principals of subrogation are so
strong that some jurisdictions declare that any insurance policy provision which modifies
the complete compensation rule is unenforceable and void.”
Nevertheless, because the policy at issue did not contain such a provision, the court refused to
address the issue of whether a provision contravening public policy or equitable principles of
subrogation would be unenforceable and void.
With regard to health insurance subrogation, Georgia has instituted the made whole doctrine
through its anti-subrogation statute. 66 A health Plan provision which requires the Plan
beneficiary to reimburse the Plan, even if the total amount collected by the Plan beneficiary is
less than the actual losses from the accident, has been held by Georgia to be unenforceable as
violating the public policy of the “complete compensation rule” as the made whole in Georgia
has affectionately been dubbed. 67
It is a question of law for the trial courts only to determine whether or not a Plan beneficiary has
been fully and completely compensated. 68 Amazingly, neither party has a right to a jury
determination of whether or not the Plan beneficiary has been made whole. 69 At least in the
64 Davis v. Kaiser Found. Health Plan of Georgia, Inc., 521 S.E.2d 815 (Ga. 1999); see also Ga. Code §
33-24-56.1, codifying the holding in Davis.
65 482 S.E.2d 325 (Ga. 1997).
66 O.C.G.A. § 33-24-56.1.
67 Davis v. Kaiser Found. Health Plan of Ga., 521 S.E.2d 815 (Ga. 1999).
68 Liberty Mut. Ins. Co. v. Johnson, 535 S.E.2d 511 (Ga. App. 2000).
69 Id.
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context of being made whole in a workers’ compensation third party action, the trial court may
not consider affirmative actions of contributory/comparative negligence/ assumption of the risk
(on the part of the employee in causing or contributing to his or her injury) in determining
whether or not the employee has been fully and completely compensated for his injuries,
because the employee total economic and non-economic losses make up the full and complete
compensation unreduced by such defenses under the Act. 70 To show how easy it is for parties
to gerrymander a settlement and avoid contractual subrogation obligations, a Georgia Court of
Appeals has held that where there is no breakdown as between economic and non-economic
damages in a settlement or a special verdict, it is essentially “impossible to determine if the
plaintiff has been fully compensated for his losses.” 71
Despite its hostility toward subrogation, in a strange bit of irony, Georgia law provides us with
one of the few cases which helps subrogating insurers and health Plans to combat the made
whole doctrine across the country. A Plan beneficiary is presumed to be made whole if he
voluntarily settles his or her case within policy limits, according to one federal district court
decision. 72 In response to an argument by the Plan beneficiary that he had not been made
whole, the court responded as follows:
This argument is unpersuasive because it fails to account for the ‘full and general release’
both Mr. Thompson and his legal representative signed with the third party tortfeasor. Mr.
and Mrs. Thompson executed the release of all their claims against tractor-trailer
Company in exchange for the amount tendered by the company. As a result of the release
and settlement agreement, Mr. Thompson’s damages were fixed and fully compensated.
The disputed claim was fully satisfied by the execution of the agreement. 73
A few other courts from other states have also followed suit implementing the logical conclusion
that if a plaintiff settles his case, the amount of plaintiff’s damages is fully fixed by the settlement
agreement entered into between the plaintiff and tortfeasor. 74 The court may conclude that the
settlement negotiations in the underlying action were conducted in an arm’s length manner, and
that the plaintiff willingly entered into the settlement agreement. Therefore, after a settlement a
plaintiff should be precluded from arguing that he was not fully compensated, and an insurer or
health Plan may assert its subrogation claim free from the constraints of the made whole
doctrine. 75 A Minnesota Supreme Court has also held that once a party settles its claim, it
cannot thereafter claim that it was not fully compensated. 76 Clearly, if a jury determines the
money necessary to make a plaintiff whole, then that is the amount which makes him whole as
a matter of law. 77 There is also a line of cases in Pennsylvania which provides that when an
injured party settles with the tortfeasor he waives his right to a judicial determination of his
losses and conclusively establishes the settlement amount as full compensation for his
damages. In those situations, it has been held that the insurance company has a right of
subrogation attaching to the amount of the settlement. 78
70 Homebuilders Ass’n v. Morris, 518 S.E.2d 194 (Ga. App. 1999).
71 North Bros. Co. v. Thomas, 513 S.E.2d 251 (Ga. App. 1999).
72 Thompson v. Fed. Express Corp., 809 F. Supp. 950, 954 (M.D. Ga. 1993).
73 Id.
74 Bell v. Fed. Kemper Ins. Co., 693 F. Supp. 446 (S.D. W.Va. 1988).
75 Id.
76 Illinois Farmers Ins. Co. v. Wright, 391 N.W.2d 519 (Minn. 1986).
77 Bell v. Fed. Kemper Ins. Co., 693 F. Supp. 446 (S.D. W.Va. 1988); United Pac. Ins. Co. v. Boyd, 661
P.2d 987 (Wash. 1983); Martine v. Hertz Corp. 103 F.3d 118 (4 th Cir 1996).
78 Illinois Auto Insurance v. Braun, 421 A.2d 1074 (Pa. 1982).
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There is Georgia case law to the effect that the made whole doctrine can be overridden by
contract terms in a policy or Plan. 79 In Duncan, the court did indicate that the policy would have
to specifically reference the made whole doctrine in order to be effective. Two (2) years later,
however, the Georgia Supreme Court concluded that any policy provisions modifying the made
whole rule were unenforceable as a matter of public policy. 80
In Davis, 81 the court resolved the issue of whether a policy containing an express provision
modifying the made whole rule was unenforceable and void as a matter of public policy. The
policy provision in question provided in pertinent part:
“[e]ven if the total amount you collect is less than your actual losses from the accident,
you must pay us.”
The court in Davis, relying upon its earlier decision in Duncan and § 33-24-56(1) of the Georgia
Code, concluded that the public policy of Georgia:
“…will not permit insurers to require an insured to agree to a provision that permits the
insurer, at the expense of the insured, to avoid the risk for which the insurer has been paid
by requiring the insured to reimburse the insurer whether or not the insured was
completely compensated for the covered loss.”
Therefore, the court concluded, policy provisions modifying the made whole rule are
unenforceable as violative of public policy. This same public policy rationale is reflected in
Georgia’s workers' compensation laws. 82 Consequently, workers' compensation carriers are not
entitled to assert their statutory subrogation liens until the claimant has been completely
compensated.
HAWAII
Hawai’i requires an insured be “made whole” before an uninsured motorist carrier may require
the insurer to reimburse the uninsured motorist carrier after receiving a tort recovery from an
uninsured motorist or party jointly liable with the uninsured tortfeasor. 83 However, Hawaii has
not specifically applied the made whole doctrine in a traditional subrogation case. In Hawaii, the
right to contractual subrogation, as opposed to equitable subrogation, does not depend on
principles of equity. Therefore, when subrogation claimed by an insurer is based on a contract,
the policy’s subrogation provisions seem to constitute the sole measure of its rights. 84
IDAHO
There are no reported state court cases in which Idaho adopts the made whole doctrine. In the
health insurance context, the 9 th Circuit, however, has adopted the made whole doctrine into
federal common law as a default rule. 85 The court in Barnes held that, unless the Plan language
specifically disclaimed the made whole doctrine, the health Plan could not enforce its
79
Duncan v. Integon General Ins. Co., 482 S.E.2d 325, 326 (Ga. 1997).
80
Davis v. Kaiser Found. Health Plan of Ga., 521 S.E.2d 815 (Ga. 1999).
81
Id.
82
Ga. Code Ann. § 34-9-11.1(b); Bartow County Bd. of Ed. v. Ray, 494 S.E.2d 29 (Ga. App. 1997).
83
AIG Hawaii Ins. Co., Inc. v. Rutledge, 955 P.2d 1069 (Haw. App. 1998).
84
State Farm Fire & Cas. Co. v. Pacific Rent-All, Inc., 978 P.2d 753 (Haw. 1999).
85 th
Barnes v. Indep. Auto Dealers Ass’n of Cal. H&W Benefit Plan, 64 F.3d 1389 (9 Cir. 1995).
Last Updated 11/26/2008 13

subrogation rights until the Plan beneficiary had recovered all of his damages and had been
made whole. Idaho appears to be in the minority in holding that the insurance company is
entitled to be reimbursed and “made whole” first as a general rule. 86
ILLINOIS
Illinois does not apply the blanket rule of the made whole doctrine. It does not recognize the
made whole rule the way other states do. 87 Illinois recognizes the validity of medical subrogation
clauses in insurance contracts and enforces them. 88 In Illinois, the effect of a subrogation clause
is identical to that of a reimbursement clause. 89 Illinois state courts will enforce contractual
subrogation rights even if the insured is not fully compensated for all of his or her injuries. 90
However, Illinois still encourages the use of the made whole doctrine in “appropriate
circumstances.” 91 In Illinois, the doctrine of subrogation will be applied according to the dictates
of “equity, good conscience, and public policy considerations” whenever a contractual
subrogation provision is not present. 92
Furthermore, case law in Illinois indicates that the made whole doctrine can be overridden by
contract terms in a policy or Plan. 93 Such a clause in a policy need not be specific, but must be
enforceable. 94 Court holds that where an insurance contract gives the insurer the right to
subrogate to the extent of its payment, the contract will be enforced as written even if the
insured's losses exceed the amount it recovers from the tortfeasor and the insurer. 95
INDIANA
Indiana recognizes the made whole doctrine through case law 96 and by statute. 97 There is
Indiana case law, however, to the effect that the made whole doctrine can be overridden by
contract terms in a policy or Plan. 98 Generally, the contract terms overriding the made whole
doctrine must be “clear, unequivocal and so certain as to admit no doubt on the question.” 99 To
date, no case has clearly provided guidance or defined exactly what it is that this means. It is
clear, however, that the standard subrogation language found in a policy is insufficient to
accomplish this overriding of the made whole doctrine. 100 It is important to also note that the
language of an insurance policy’s subrogation provision will play a role in determining whether
86
Cedarholm v. State Farm Mut. Ins. Co., 338 P.2d 93 (Idaho 1959).
87
In re Estate of Scott, 567 N.E.2d 605 (Ill. App. 1991).
88
Principal Mut. Life Ins. Co. v. Baron, 964 F. Supp. 1221 (N.D. Ill. 1997).
89
Id.
90
Id; Capitol Indem. Corp. v. Strikezone, 646 N.E.2d 310 (Ill. App. 1995).
91
In re Estate of Scott, supra.; In re Estate of Schmidt, 398 N.E.2d 589 (Ill. App. 1979) (Insurer had no
right to be subrogated to insured’s widow’s right of recovery and wrongful death action where subrogation
policy terms specifically provided that insurer was to be subrogated to “insured’s” right of recovery for loss
and, under Wrongful Death Act, the insured decedent has no right to recover for his own death).
92
In re Scott, supra.
93
Hardware Dealers Mut. Fire Ins. Co. v. Ross, 262 N.E.2d 618 (Ill. 1970).
94 Strikezone, supra.
95 Capitol Indem. Corp. v. Strike Zone, S.S.B. & B. Corp., 646 N.E.2d 310 (1995).
96 Capps v. Clegs, 382 N.E.2d 947 (Ind. Ct. App. 1978).
97 I.C. § 34-51-2-19 (1999).
98 Erie Ins. Co. v. George, 681 N.E.2d 183, 188 (Ind. 1997); Willard v. Auto Underwriters, Inc., 407 N.E.2d
1192 (Ind. App. 1980).
99 Capps, supra.
100 Id; Willard, supra.
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or not a plan beneficiary has been made whole. For instance, where the subrogation clause of
the plan indicates the plan is subrogated to all rights of recovery arising out of any claim or
cause of action has against a third party, this clause establishes the insurer’s right to
subrogation against the proceeds of a settlement. 101 The settlement recovered by the
beneficiary must also contain the elements of damage, which represent the payments made by
the plan. 102
Indiana courts have held that the “made whole” doctrine applies to contractual as well as
equitable subrogation. 103 A contract may not avoid application of the doctrine unless it is “clear,
unequivocal and so certain as to admit no doubt on the question to avoid application of the
before the debt is satisfied.” 104
Although parties to an insurance contract may contractually agree that the made-whole rule will
not have application, the contractual provision, to be enforceable, “must be clear, unequivocal
and so certain as to admit no doubt on the question.” 105 This standard has been applied in the
context of the uninsured motorist act. 106 Despite the fact that no Indiana court has defined what
is meant by “clear and unequivocal,” the standardized language commonly found in subrogation
provisions clearly does not satisfy the standard. 107
The language used in the subrogation provision is also an important consideration in
determining whether a settlement with the tortfeasor constitutes complete compensation. In this
context, where the provision provides for the right to be subrogated to all rights of recovery
arising out of any claim or cause of action it establishes the insurer's right to subrogation against
the proceeds of a settlement. 108 In addition to the language, however, the settlement must have
included compensation for losses covered under the policy. 109
IOWA
Iowa recognizes the made whole doctrine but refers to it as the “full recovery rule”. 110 The full
recovery rule requires that an insurance company’s claim for reimbursement or subrogation is
not effective until the insured has been fully compensated for his damages. 111 In general, Iowa
recognizes that the resolution of subrogation issues is guided by the equitable principle that an
injured party is entitled to be made whole. 112
Notwithstanding the above, there has been some ambiguity in Iowa as to the application of the
made whole doctrine rule. In Pipho, 113 an injured automobile passenger settled her claim with
the driver’s insurer, and the passenger’s health insurer thereafter filed a subrogation claim
seeking reimbursement from the settlement proceeds for medical benefit payments it had made.
101 Mutual Hosp. Ins., Inc. v. MacGregor, 368 N.E.2d 1376 (Ind. App. 1977).
102 Id.
103 Willard v. Auto. Underwriters, Inc., 407 N.E.2d 1192 (Ind. Ct. App. 1980).
104 Id.
105 Willard, supra.; Capps, supra.
106 Capps, supra.
107 Willard, supra.; Capps, supra.
108 Mut. Hosp. Ins. Inc. v. MacGregor, 368 N.E.2d 1376 (Ind. App. 1977).
109 Id.
110 Continental Western Ins. Co. v. Krebill, 492 N.W.2d 405 (Iowa 1992).
111 Brandon v. West Bend Mut. Ins. Co., 681 N.W.2d 633 (Iowa 2004).
112 Allied Mut. Ins. Co. v. Heiken, 675 N.W.2d 820 (Iowa 2004).
113 Pipho, supra.
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Pipho’s past medical expenses were approximately $19,000, of which $11,778.67 was paid by
the health Plan. After trial, a court assessed Pipho’s total damages, including loss of future
earnings and a past and future pain and suffering, in excess of $400,000. The insured settled
for the tortfeasor’s $25,000 policy limits, and the settlement agreement did not allocate any
particular share of the settlement amount as medical expenses. The health Plan filed a
subrogation claim, seeking reimbursement from the settlement proceeds for $11,778.67 in
benefits it had paid. The insured claimed that she was not made whole. The court refused to
apply the made whole doctrine, logically concluding that the health Plan had not undertaken to
insure Pipho for pain and suffering, lost wages, or impairment of future earning capacity. A
denial of the health insurer’s subrogation claim on the grounds that the insured did not recover
these uninsured elements of damages, had the effect of making the health Plan an insurer
against those losses as well. The Court of Appeals ruled that if settlement funds can be
allocated into specific elements of a claim, the medical expenses portion of that settlement
should be subrogable for the health insurer even if other elements of the insured’s cause of
action are not fully satisfied. 114 If the amount of settlement funds which are attributable to
medical expense cannot be identified, the court held that a “mini-trial” should be conducted in
order to make such a determination. 115
The Iowa Supreme Court has held that an insured need not be paid in full for pain and suffering
and disability prior to allowing subrogation for medical expenses. 116 This decision disagrees
completely with the Rimes v. State Farm Mut. Auto. Ins. Co. decision by the Wisconsin
Supreme Court, which has been the paradigm of made whole issues in so many states. 117
However, there is some authority in Iowa to the effect that the made whole doctrine can be
overridden by the contract terms of a Plan or policy. 118
With regard to the ability of a policy to override the made-whole doctrine, the Iowa Supreme
Court has adopted the rule that “when the total of the insured’s recovery from a third party and
the insurance company’s payments under the policy still are less than the loss sustained, the
insured has not been made whole, and the insurer may not recover against him.” The Supreme
Court also held that insurer may obtain reimbursement if insured is “made whole” with respect
the elements of damages covered by insurance; courts need not take into account other
elements of damages (such as pain and suffering) in determining whether insured was “made
whole” by tort recovery. 119
Application of the made-whole doctrine in Iowa is complicated somewhat by Iowa's procedure
for determining whether an insured has been made whole. For example, in Ludwig v. Farm
Bureau Mutual Insurance Co., the court was asked to resolve whether an insured who had
settled her action against the third party had received full compensation for purposes of the
made whole doctrine. 120 The insurer in Ludwig argued that when a settlement is made without
the involvement of the company, the insured is presumed to be made whole. The insured, on
the other hand, contended that because she had not received compensation for her pain and
114 Iowa American Ins. Co. v. Pipho, 456 N.W.2d 228 (Iowa App. 1990).
115 Id.
116 Ludwig v. Farm Bureau Mut. Ins. Co., 393 N.W.2d 143 (Iowa 1986).
117 Rimes v. State Farm Mutual Auto. Ins. Co., 316 N.W.2d 348 (Wis. 1982).
118 Ludwig, supra; see also Kapadia v. Preferred Risk Mut. Ins. Co., 418 N.W.2d 848 (Iowa 1988) (citing
73 Am.Jur.2d Subrogation § 2 at 599 (1974).
119 Ludwig, supra.
120 Id.
Last Updated 11/26/2008 16

suffering in the settlement she had not been fully compensated. The subrogation provision of
the policy provided:
Upon payment under part II of this policy [the “medical protection” provision] the Company
shall be subrogated to the extent of such payment to the proceeds of any settlement or
judgment that may result from the exercise of any rights of recovery which the injured
person or anyone receiving such payment may have against any person or organization
and such person shall execute and deliver instruments and papers and do whatever else
is necessary to secure such rights. Such person shall do nothing after loss to prejudice
such rights.
Though the holding in Ludwig is consistent with the policy language, the court didn’t accord it
any weight in its analysis. Rather, it relied on the fact that the insured's medical expenses, lost
wages, expense of hired help and car damage were established and each attributed specific
dollar amounts in the settlement. Because the amount recovered from the third party could be
attributed to separate and specific elements of damages, any money identified with covered
losses which the insurer had paid for was subject to the latter's subrogation claim, regardless of
whether the insured had been compensated for all of its damages. According to the court, any
other rule would make insurance companies indemnitors of losses not covered in the policy and
operate as a windfall to the insured who had not paid for such coverage. While the settlement in
Ludwig attributed a specific amount to medical expenses, the court noted that when the amount
attributed to the subrogated claim cannot be determined by other means, a mini-trial might be
required.
KANSAS
The made whole doctrine in Kansas will be largely inapplicable in the area of health insurance
subrogation due to the strong anti-subrogation statute in that state. 121 However, if a Plan or
policy is exempt from the anti-subrogation statute or the Plan or policy is “issued” in another
state, the anti-subrogation statute may not be applicable and the issue of whether or not a Plan
can subrogate when its Plan beneficiary is “made whole” may arise. There is little case law in
Kansas to guide us. However, the Kansas Supreme Court has indicated that it is within the
discretion of the trial court to apply equitable standards in assessing damages in order that the
plaintiff may be made whole. 122
Another Kansas Supreme Court decision, speaking about the duty of an insured to hold any
third party recovery in trust for the subrogated insurer, refers to a recovery “in excess of the
amount of the balance of his loss and expenses of suit”, intimating that if pressed, Kansas
would apply the made whole doctrine. 123 This may be the case law from which future made
whole decisions arise. There is authority for the proposition that a carrier may expand its
equitable subrogation rights by contract, specifically negating the application of the made whole
doctrine in its policy’s terms. 124
With regard to ERISA Plans, the 10 th Circuit has held that the made whole rule is the default rule
which is preempted when the Plan language specifically negates the made whole doctrine by its
121 Kan. Admin. Regs. § 40-1-20 (1987).
122 Gillespie v. Seymour, 823 P.2d 782 (Kan. 1991).
123 Shawnee Fire Ins. Co. v. Cosgrove, 116 P. 819 (Kan. 1911).
124 Unified School District No. 259 v. Sloan, 871 P.2d 861, 865 (Kan. 1994).
Last Updated 11/26/2008 17

own terms. 125 See the next chapter dealing with ERISA Plans if you are dealing with an ERISAcovered
Plan (whether self-funded or fully-insured). There is authority in Kansas to the effect
that the made whole doctrine can be overridden by contract terms in a Plan or policy. 126
KENTUCKY
Kentucky does not differentiate between equitable subrogation and contractual subrogation with
regard to the application of equity. 127 Therefore, applying general principles of equity, Kentucky
holds that an insured must be fully compensated for his injuries or losses before the insurer’s
subrogation rights arise. 128 However, the made whole doctrine will not apply if disclaimed by
either statutory law or the language of the contract. 129 Therefore, Kentucky joins a minority of
states which allow a contractual disclaimer of the made whole doctrine under state law and
within the terms of its Plan language. 130 The analysis a court must go through to determine
whether a plan’s language successfully disclaims the made whole doctrine, however, is
somewhat more complex. This is because Kentucky considers all agreements and
communication between an insurer and its insured – settlement agreements, policy and plan
language, releases, trust agreements, etc. – in determining the parties’ intent with regard to
waiving the made whole doctrine. 131
The Kentucky Supreme Court has held that subrogation rights may be modified by contract only
if violence is not done to established equitable principles. 132 The Supreme Court held that
principles of equity did not require insured to be “made whole” before carrier was entitled to
subrogation where (1) insurance language clearly and explicitly provided insurer with the right of
subrogation and subordinated insured’s interests in any recovery in favor of insurer until insurer
was reimbursed, and (2) at time of claim, each party was represented by counsel and enjoyed a
parity in bargaining position, and (3) insured's losses had already been sustained and were fully
known and appreciated. 133
The analysis for determining whether a contract alters the common law priority of right rule
between the insurer and its insured is more complex. This complexity results from the fact that
all agreements between the parties (i.e. policy language, releases, trust agreements, etc.) are
relevant in determining whether the parties intended to modify the common law rule. 134 In order
to effectively shift the priority of right of the insured to the insurer, the language must clearly and
explicitly document the intent of the parties to: (1) provide the insurer with a right of subrogation;
(2) permit that right to arise immediately; and (3) subordinate the insured's interest in further
recovery to that of the insurer to subrogation. 135
125 Alves v. Silverado Foods, Inc., 6 Fed. Appx. 694 (10 th Cir. 2001).
126 Unified School Dist. No. 259 v. Sloan, 871 P.2d 861, 865 (Kan. 1994).
127 Wine v. Globe American Cas. Co., 917 S.W.2d 558 (Ky. 1996).
128 Id.
129 Id.
130 Id.
131 Id.
132 Id.
133 Id.
134 Id.
135 Id.
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LOUISIANA
Louisiana refers to the made whole doctrine as the “full compensation rule.” It requires an
insured to be fully compensated before an insurer or Plan may exercise its subrogation rights. 136
Unlike the case in a majority of states, Louisiana does place the burden of proving full
compensation on the insured/Plan beneficiary, as opposed to requiring the Plan or insurer to
prove it. 137
The Louisiana Court of Appeals has indicated that the made whole doctrine is considered a rule
of interpretation or a gap filler which becomes significant only when a contract or Plan fails to
clearly address the issue. 138 The Louisiana Supreme Court has held that despite a subrogation
clause, if the insured is less than fully compensated by tort recovery, the insurer is only partially
subrogated, and the insured has complete priority in receiving payment. 139
MAINE
In addition to the limits on priority liens mandated of health insurers in § 2729-A, which applies
generally to health insurance policies, similar limitations apply in another statute which applies
to group or blanket policies. 140 Maine does not appear to have any case law which discusses
application of the made whole doctrine, except for an allusion to the fact that with regard to
uninsured motorist subrogation, Maine favors full satisfaction by the insured victim of his
damages to which he is legally entitled to recover from the owners or operators of the uninsured
vehicle before the right of subrogation attaches. 141
MARYLAND
Not only does Maryland not adopt the made whole doctrine, it specifically disclaims it. 142 In
Stancil, the homeowner’s insurer that paid policy limits for fire destroying a home as a result of
an automobile accident was entitled to subrogation from the tortfeasor before the insured was
made whole. 143 The fact that the insured failed to properly insure his property created no
responsibility by the insurer, and the principles of equity did not apply. 144 What is interesting
about Maryland subrogation is that in order to waive or contract around the made whole
doctrine, it is not necessary to show intent of the parties through contract language or otherwise.
All that is needed is a right of subrogation expressed in the contract or Plan. 145 It should be
noted that while the court’s decision in Stancil is favorable and makes subrogation sense, the
136 Southern Farm Bureau Cas. Ins. Co. v. Sonnier, 406 So.2d 178 (La. 1981); Carter v. Bordelon, 370
So.2d 113 (La. App. 1979).
137 Wallace v. Aetna Life & Cas. Ins. Co., 499 So.2d 577 (La. App. 1986).
138 Nat’l Emp. Benefit Trust of the Associated Gen. Contractors of America v. Sullivan, 940 F. Supp. 956
(W.D. La. 1996); Roberts v. Richard, 743 So.2d 731 (La. App. 1999).
139 S. Farm Bureau Cas. Ins. Co. v. Sonnier, 406 So. 2d 178 (La. 1981); see also Brister v. Blue Cross
and Blue Shield of Florida, Inc., 562 So.2d 1040,1044 (La. Ct. App. 1990) (“What the Supreme Court held
in Sonnier was that since the survivors had not been fully compensated, the subrogated insurer could not
collect from the survivors the amount the insurer had paid them.”).
140 Me. Rev. Stat. Ann. Tit. 24-A, § 2836 (1976).
141 Wescott v. Allstate Insurance Co., 397 A.2d 156 (Me. 1979).
142 Stancil v. Erie Ins. Co., 740 A.2d 46 (Md. App. 1999).
143 Id.
144 Id.
145 Id.
Last Updated 11/26/2008 19

court in that decision distinguished between the property insurance policy at issue in that case
and generic health insurance policies or Plans:
Health insurance policies differ from the policy involved sub judice which has a precise
policy limit, a maximum amount that the insurer is required to pay. Health insurance
policies do not require the insured to select a maximum overall limit. The limits are set by
the company depending on the medical service provided. Here, Stancil decided on the
limit and chose one that was less than the real value of his property. 146
Whether and to what extent this health insurance/property insurance distinction affected the
court’s decision and will affect the decisions of future appellate courts hearing similar matters
involving health insurance subrogation is not certain at this point.
Maryland courts have held that, in the context of homeowner’s insurance policy in which insured
elected not to fully insure his property, principles of equity did not require insured to be made
whole before insurer was entitled to subrogation. 147 The court distinguished Stancil from those
cases involving health care claims, recognizing that the principles of equity might demand that
the insured be made whole before insurer would be entitled to subrogation in the context of
health care claims.
MASSACHUSETTS
It does not appear that Massachusetts adheres to or applies the made whole doctrine. In a
concurring opinion, the Massachusetts Supreme Court stated as follows:
Subrogation is a reasonable method of assisting and holding down the costs of health
insurance. It prevents an undeserved windfall to the insured. It is appropriate to consider
the matter of medical expenses apart from other aspects of the insured person’s claim.
Whenever uncertainty may exist with respect to other elements of damages, the amount
paid under the medical insurance policy can be ascertained and dealt with independently.
I see no justification for denying subrogation as the court seems to suggest, because, in
settling a case, the claimant may not be made whole on all elements of his damages. The
claimant can be and is made whole on his medical costs, to the extent of his coverage. A
health insurer should not be obliged to forego asserting subrogation rights in order to
assist in making a claimant whole on some other aspect of his damages, such as lost
wages and pain and suffering, for which the insured has not purchased coverage from the
health insurer. 148
Speaking specifically with regard to a health insurance Plan’s right of reimbursement, the 1 st
Circuit, applying Massachusetts’ law, has held the made whole doctrine will not prevent a health
insurance Plan from subrogating where, despite the fact that the insured is not made whole, the
Plan gives itself such a right according to its terms. 149 In Massachusetts, the made whole
doctrine is merely considered a “gap filler” which comes into play when contracts fail to address
146 Id. at 48.
147 Id.
148 Frost v. Porter Leasing Corp., 436 N.E.2d 387 (Mass. 1982); see also, Rogers Street, L.L.C. v. Am.
Ins. Co., 2004 WL 2425042 (Mass. Super. 2004) (unreported decision); Liberty Mut. Ins. Co. v. Nat’l
Consol. Warehouses, Inc., 34 Mass. App. Ct. 293 (Mass. App. 1993) (which, according to the decision in
Rogers Street, L.L.C., did not adopt the made whole doctrine).
149 Harris v. Harvard Pilgrim Healthcare, Inc., 208 F.3d 274 (1 st Cir. 2000).
Last Updated 11/26/2008 20

the issue clearly and, which, of course, the insured may sign away the right to be made
whole. 150
MICHIGAN
Since 1919, Michigan has adhered to the made whole doctrine and provided that an insurer has
no right of subrogation where the insured’s loss exceeds his recoveries from his insurer and the
one causing the fire, after deducting attorney’s fees and costs. 151 The 1919 decision of
Washtenaw Mutual Fire Insurance Co. v. Budd, notes that the insured was not invited to take
part in the action against the third party, and the policy involved was a “valued policy” which
paid only two-thirds (2/3) of the value of the loss. 152
There does not appear to be any authority indicating that a Plan/Insurer can contract around the
made whole rule – but there likewise is no authority indicating that they cannot. In Union Ins.
Soc. of Canton v. Consolidated Ice Co., 153 the Michigan Supreme Court considered a purely
equitable subrogation case, and didn’t make any mention of a contractual right of subrogation,
or even whether there was a subrogation provision in the subject policy. Nonetheless, the Court
seemed to hold that an insurer is not entitled to subrogation against an insured for a judgment
recovered against the wrongdoer if the total amount received by insured, after deducting
attorney's fees and costs, does not fully compensate insured. 154
MINNESOTA
The general rule in Minnesota is that subrogation may be denied unless the insured is made
whole. 155 Minnesota employs the made whole doctrine, but they refer to it as the “full recovery
rule.” 156 Unfortunately, Minnesota applies the full recovery rule regardless of whether or not the
subrogation rights at issue arise from equity or contract. 157 However, a case appears to open
the door to avoiding the full recovery rule where the Plan’s expressed terms provide to the
contrary. 158
The Minnesota Supreme Court, referring to the full recovery rule stated:
“...absent express contract terms to the contrary, subrogation will not be allowed where
the insured’s total recovery is less than the insured’s actual loss.”
150
Rogers Street L.L.C., supra; 4 Richard H. Long, The Law of Liability Insurance, § 23.02(2)(a) (2004).
151
Washtenaw Mut. Fire Ins. Co. v. Budd, 175 N.W. 231 (Mich. 1919).
152
Id.
153
Union Ins. Soc. of Canton v. Consolidated Ice Co., 245 N.W. 563 (Mich. 1932).
154
Id; see also Mich. Mut. Ins. Co. v. Shaheen, 300 N.W.2d 599 (Mich. Ct. App. 1980) (holding that
agreement providing that insured would hold, for the benefit of insurer, all rights and claims which he had
against any other parties involved in the action should be interpreted to compel insured to reimburse
insurer only for that amount of insured’s recovery which exceeds damages defendant has suffered,
including costs and attorney fees).
155
Hershey v. Physicians Health Plan of Minn., Inc., 498 N.W.2d 519 (Minn. 1993); Westendorf by
Westendorf v. Stasson, 330 N.W.2d 699 (Minn. 1983).
156
Id.
157
Id; Medica, Inc. v. Atlantic Mutual Ins. Co., 566 N.W.2d 74, 77 (Minn. 1997); Hershey, supra.
158 Id; Medica, Inc., supra.
Last Updated 11/26/2008 21

They expressly refuse to follow those cases that a subrogation clause ipso facto authorizes first
priority recovery by the insurer. 159 A Minnesota Supreme Court later held that because the
doctrine of subrogation is equitable in origin, even when the right to subrogation is contractual,
the carrier’s subrogation rights will be governed by equitable principles, unless the contract
clearly and explicitly provides to the contrary. 160 First, you must determine if the insured is made
whole. Then, if the answer is “no”, you must look to see if the agreement “supersedes the
general rules of equity by stating that [the insurer] is to be reimbursed even if its member
recovers less than full compensation.” 161 It is not clear to what extent magic words are needed
to accomplish this. At a minimum, however, it would seem that language which clearly and
unequivocally demonstrate that the intent of the parties is to waive the made whole doctrine,
must be used. 162 The 8 th Circuit has also weighed in on the issue, agreeing with the Minnesota
Supreme Court that the full compensation rule can be waived in the plan or policy. 163
The Minnesota Supreme Court in Westondorft applied made-whole doctrine despite a contract
provision giving the HMO provider a right to reimbursement to extent of damages recovered,
noting that equitable principles apply to all instances of subrogation unless modified by specific
provisions in the contract. 164
MISSISSIPPI
Unfortunately, Mississippi doesn’t differentiate between equitable subrogation and contractual
subrogation with regard to the application of equitable subrogation defenses, such as the made
whole doctrine. 165 Therefore, a health insurer will not be able to subrogate until its insured or
Plan beneficiary has been made whole. 166
The Mississippi Supreme Court has issued an opinion in a case involving an ERISA-covered
Plan. 167 In that case, Mississippi again confirmed that the made whole doctrine was adopted by
Mississippi in the Hare v. State case, even though that case dealt with a state-sponsored
insurance Plan and not one operating under the constraints of ERISA. 168 Unlike some states,
Mississippi does not allow the terms of a contract to nullify the made whole doctrine. 169
The Mississippi Supreme Court has adopted the “made whole” rule, rejecting an insurer’s
argument that it was entitled to reimbursement of “all sums recovered ... by settlement” for
hospital, medical or related services under the terms of the insurance plan. 170 The Court
explained that allowing the literal language of an insurance contract to destroy an insured's
equitable rights “ignores the fact that this type of contract is realistically a unilateral contract of
insurance and overlooks the insured's total lack of bargaining power in negotiating the terms of
these types of agreements.”
159
Id.
160
Medica, Inc., supra.; Westendorf, supra.
161
Westendorf by Westendorf v. Stasson, 330 N.W.2d 699 (Minn. 1983).
162
Maday v. Yellow Taxi Co., 311 N.W.2d 849 (Minn. 1981); Preferred Risk Mutual Ins. Co v. Pagel, 439
N.W.2d 755 (Minn. App. 1989).
163 th
MedCenters Health Care v. Ochs, 26 F.3d 865 (8 Cir. 1994).
164
Westondorf, supra.
165
Hare v. State, 733 So.2d 277 (Miss. 1999).
166
Id.
167
Yerby v. United Healthcare Ins. Co., 846 So.2d 179 (Miss. 2002).
168 Id.
169 Hare, supra.
170 Id.
Last Updated 11/26/2008 22

MISSOURI
No Missouri court has expressly addressed the issue of priority of rights as between an insurer
and its insured in the context of a conventional subrogation dispute. However, in Hayde v.
Womach, the court in the context of the No Fault Act concluded that the dual objectives of
subrogation precluded a no fault carrier from asserting a subrogation claim where its insured
has not obtained full recovery. 171
MONTANA
Montana is an anti-subrogation state with regard to medical payment benefits made under an
automobile insurance policy. 172 Where subrogation is allowed, however, an insured must be
totally reimbursed for all losses, as well as costs, including attorney’s fees, involving recovering
those losses before the insurer can exercise any right of subrogation, regardless of contract
language to the contrary. 173 In Skauge, the court held that:
When the sum recovered by the insured from the tortfeasor is less than the total loss and
thus either the insured or the insurer must to some extent go unpaid, the loss should be
borne by the insurer for that is a risk the insured has paid it to assume. 174
The made whole doctrine, as established in Skauge in 1977, requires that an insured be “made
whole” before an insurer can assert its subrogation rights. This meant that, not only must the
insured recover all of her losses but also all costs of recovery as well, such as attorneys’ fees
and costs of litigation. In other words, the insured must be “totally reimbursed for all losses as
well as costs, including attorney fees.” 175
Most recently, the Montana Supreme Court, in a 2008 decision, expanded the made whole
doctrine to place a duty on a subrogating insurer to affirmatively determine whether the insured
has been made whole before it subrogates. 176 In that case, Ferguson was in an automobile
accident, and her insurer, Safeco, paid for the total loss of the vehicle, less the deductible, but
did not pay for several other losses Ferguson had sustained. Safeco never provided her with
any notice that it would seek subrogation; never investigated, inquired or made a determination
as to whether Ferguson was made whole for her losses; and never reimbursed Ferguson for her
uncovered losses including her deductible, unpaid rental car expenses, and attorneys’ fees.
Based on those egregious facts, the Supreme Court erroneously interpreted Swanson to
establish a duty on the part of a subrogating carrier to determine if the insured was made whole
before it subrogated. Ferguson sued Safeco and certified a class action lawsuit, claiming Safeco
engaged in “a common scheme of deceptive conduct,” by taking subrogation recoveries without
an investigation into and determination of whether the insureds have been made whole. That
171
707 S.W.2d 839 (Mo. App. 1986).
172
Youngblood v. American States Ins. Co., 866 P.2d 203 (Mont. 1993).
173
Skauge v. Mountain States Tel. & Tel. Co., 565 P.2d 628 (Mont. 1977); Swanson v. Hartford Ins. Co.
of Midwest, 46 P.3d 584 (Mont. 2002); Mont. Code Ann. § 33-23-203(2) (1997) (held unconstitutional to
the extent that it allowed automobile insurer to charge premiums for non-existent UIM coverage); Hardy v.
Progressive Specialty Ins. Co., 67 P.3d 892 (Mont. 2003).
174
Skauge, 565 P.2d at 632.
175
Id.
176
Ferguson v. Safeco Ins. Co. of Am., 2008 WL 854841 (Mont. 2008).
Last Updated 11/26/2008 23

class action suit was pending as of the date of this publication. A health service corporation’s 177
right of subrogation may not be enforced until the injured party has been made whole. 178
The Montana Supreme Court has rejected an argument that contract language can override
equitable made whole doctrine, and reaffirms that the public policy in Montana requires that an
insured must be totally reimbursed for all losses as well as costs, including attorney fees,
involved in recovering those losses before the insurer can exercise any right of subrogation,
regardless of any contract language providing to the contrary. 179
NEBRASKA
Nebraska adheres to the made whole doctrine and believes that where an insurer seeks
subrogation and the insurer has not been made whole, equitable principles necessitate
disallowing the insurer to assert subrogation rights. 180 Any contractual subrogation provisions
which attempt to negate the made whole doctrine are deemed unenforceable as being in direct
opposition to the equitable principles of subrogation. 181 When a health insurer subrogates,
whether or not its subrogation rights can be enforced against the Plan beneficiary requires
resolution of factual issues, such as the amount of medical costs incurred by the Plan
beneficiary and the extent of other damages sustained by her. 182 Nebraska adheres to the made
whole doctrine and an insurer will only be able to subrogate when its insured has obtained an
amount which exceeds the insured’s total damages or loss. 183 In fact, a contractual subrogation
provision which entitles the Plan to recover, regardless of whether the insured is made whole, is
unenforceable as being in direct opposition to the equitable principles of subrogation. 184
In Shelter Insurance Companies v. Frohlich, 185 the Nebraska Supreme Court addressed the
issue of whether a grant of a summary judgment motion to an insurer was proper where the
insured had not been fully compensated for her loss. In resolving this issue, the court
recognized that general subrogation clauses, while typically valid and enforceable, rarely define
the precise nature and extent of an insurer's subrogation interest or right. Consequently, the
common law rule that subrogation is unavailable until the subrogor has been paid in full is
applicable unless the contract provides for subrogation on payment of less than full recovery. In
other words, “unless a contract provides otherwise, equitable principles apply even when a
subrogation right is based on contract.” It is not enough that the contractual rights merely
provide for or recognize the insurer's right of subrogation.
Full compensation, in the absence of a contract or statutory provision to the contrary, is a
prerequisite to subrogation. 186 The rationale for this rule is that the insurance policy contains a
basic promise to pay which should be subordinated to the insured's right to complete
177 As seen, this includes only non-profit corporations and would not include a traditional health insurer.
178
Mont. Code Ann. § 33-30-1102 (1987).
179
Swanson v. Hartford Ins. Co. of Midwest, 46 P.3d 584 (Mont. 2002); see also Youngblood v. Am.
States Ins. Co., 866 P.2d 203 (Mont. 1993) (observing that “subrogation of medical payment benefits in
Montana is void as against public policy.”).
180
BlueCross & BlueShield of Neb., Inc. v. Dailey, 687 N.W.2d 689 (Neb. 2004).
181
Id.
182
Bartunek v. George A. Hormel Co., 513 N.W.2d 545 (Neb. App. 1994); Skauge v. Mountain States Tel.
& Tel. Co., 565 P.2d 628 (Neb. 1977).
183 Bartunek, supra; Shelter Ins. Co. v. Frohlich, 498 N.W.2d 74 (Neb. 1993).
184 Dailey, supra.
185 Frohlich, supra.
186 Id.
Last Updated 11/26/2008 24

compensation. Thus, if anyone is to go unpaid it should be the insurer. Because the subrogation
provision at issue in Frohlich was insufficient to modify the common law made whole rule, the
court reversed the grant of summary judgment in favor of the insurer and remanded the case
back to the trial court for purposes of determining what amount would constitute full
compensation of the insured.
In Blue Cross & Blue Shield, Inc. v. Dailey, 187 the Supreme Court of Nebraska recommitted itself
to the common law made whole rule by overruling Frohlich to the extent that it could be
construed to permit conventional subrogation when the insured has not been fully compensated.
In other words, the court in Dailey made it clear that the parties may not contract out of the
made whole rule.
There is no precise formula for determining whether an insured has been made whole in
Nebraska. The issue is generally treated as a question of fact. However, medical expenses and
other damages suffered by the insured are to be considered. 188 Factors affecting the
enforceability of a subrogation right such as the tortfeasor's ability to pay beyond the amount of
the subrogor's settlement and whether the settling parties have stipulated that the settlement
satisfies all damages sustained by the insured are also relevant. Jury verdicts, however, are
presumptively conclusive of the amount that would completely compensate the insured. 189
While there is some authority in Nebraska for the proposition the made whole doctrine may be
overridden by specific contract terms in a Plan or policy, the case law which suggests this dealt
with § 44-3,128.01, the Nebraska statute which allows an automobile liability policy to contain a
provision permitting pro rata subrogation in the situation where the insured did not fully recover
his or her loss, and probably isn’t germane to regular subrogation matters. 190 However, case law
also says that “if a contractual right of subrogation is merely the usual equitable right which
would have existed in any event in the absence of a contract, equitable principles control
subrogation.” 191 This leaves open the argument that if the terms of the policy or insurance
contract provide for something different from common law equitable subrogation (such as
reimbursement provisions, etc.), an argument might be successfully made that the contract can
overrule the equitable made whole doctrine.
The Nebraska Supreme Court has declared that contractual language that attempts to allow an
insurer to recover regardless of whether insured is fully compensated is unenforceable. 192 It
explained that insurance terms which purport to place burden of loss on the insured despite the
fact that the insured has paid the insurer to bear the risk are “in direct opposition to the equitable
principles upon which subrogation is allowed.” 193
187 Dailey, supra.
188 Frohlich, supra.
189 Bartunek v. Hormel, 513 N.W.2d 545 (Neb. 1994); see also Pleon v. Union Ins. Co., 573 N.W.2d 436
(Neb. 1998) (holding statute providing that settlement or judgment less than the policy limit of any
applicable automobile liability insurance policy constitutes complete recovery of actual economic loss to
be constitutional).
190 Ploen v. Union Ins. Co., 573 N.W.2d 436, 443 (Neb. 1998).
191 BlueCross & BlueShield of Neb., Inc. v. Dailey, 687 N.W.2d 689 (Neb. 2004).
192 Id.
193 Id.
Last Updated 11/26/2008 25

NEVADA
Until recently, Nevada had not addressed the application of the made whole doctrine. In
previous decisions, the court seemed to discount the application of a made whole doctrine in the
context of an ERISA subrogation action. 194 However, in 2005, the Supreme Court of Nevada
declared that the made whole doctrine was a general equitable principle of insurance law that
prevented an insurance company from enforcing its subrogation rights before the insured had
been fully reimbursed for their losses. 195 However, the court went on to say that if a contract
exclusively excludes the made whole doctrine, the doctrine will not apply to limit an insurance
company’s subrogation rights. 196
NEW HAMPSHIRE
The made whole doctrine has at least been applied to health insurance subrogation. Health
insurers may not subrogate where the Plan beneficiary is not made whole from the third party
recovery. 197 It should also be noted that where there is a valid subrogation clause in an
insurance policy involving an injured minor and a parent, the health insurer is subrogated to the
parent’s right to recover medical expenses. 198 Where there is a reduced recovery, such as a
policy limits third party settlement, the respective shares allocated to the parent and the minor
should bear the same proportions to the total settlement that the full loss of each would have
borne to a complete recovery. 199 There is no justification for treating a settlement within policy
limits, however, as a reduced recovery. When the enforceability of the settlement is not in
question, there is no reason to assume that a plaintiff who settles for less than the defendant’s
policy limits has acted irrationally in choosing not to test the value of his claim by litigating his
case to a verdict. 200
NEW JERSEY
New Jersey has adopted the made whole doctrine. 201 A health insurer who is entitled to
subrogate may not do so if the Plan beneficiary has not been made whole. 202 Of course, this
decision came down before the appellate court in Perreira, 203 which held that the collateral
source rule in New Jersey did not bar a health insurer from subrogating, and was reversed by
the New Jersey Supreme Court. 204 New Jersey adheres to the made whole doctrine with regard
to health insurance subrogation, even though health insurance subrogation is not allowed.
194 Trustee of Hosp. Employees & Restaurant Employees Int’l Union Welfare Fund v. Kirby, 890 F. Supp.
939 (D. Nev. 1995).
195 Canfora v. Coast Hotels and Casinos, Inc., 121 P.3d 599 (Nev. 2005).
196 Id.
197 Dimick v. Lewis, 497 A.2d 1221 (N.H. 1985).
198 BlueCross & BlueShield of New Hampshire-Vermont v. St. Cyr, 459 A.2d 226 (N.H. 1983).
199 Dimick, supra.
200 Roy v. Ducmuigeem, 532 A.2d 1388 (N.H. 1987).
201 O’Brien v. Two West Hannover Co., 795 A.2d 907 (N.J. Super. 2002); McShane v. N.J. Mfrs. Ins. Co.,
375 N.J. Super. 305, 312 (App.Div.2005); In Re Complaint of Weeks Marine, 2006 WL 1843130 (D.N.J.
2006).
202 Werner v. Latham, 752 A.2d 832 (N.J. Super. 2000).
203 Perreira v. Rediger, 750 A.2d 126 (N.J. App. 2000).
204 Id.
Last Updated 11/26/2008 26

However, there is authority in New Jersey to the effect that the made whole doctrine may be
overridden by specific contract terms in a Plan or policy. 205 In Hogges, the court explained that:
In the absence of express terms in the contract to the contrary, [the insured] must be
made or kept whole before the insurer may recover anything from him or from a third party
under its right of subrogation. Against the insured, as well as against third parties, there
may be recovery by the insurer (again, subject to the express terms of the contract) only if
the cause is just and enforcement is consonant with reason and justice. 206
The New Jersey Supreme Court has observed that the made-whole doctrine applies to
contractual as well as equitable subrogation. 207 An insurer may not avoid application of make
whole doctrine unless the insurance contract is sufficiently specific and honors reasonable
expectations of the parties. In this context the relevant subrogation clause and agreements are
to be evaluated. If the subrogation clause or contract is sufficiently specific to alter the common
law made whole doctrine neither can be disregarded unless it fails to honor the reasonable
expectation of the parties is unconscionable, and violative of public policy. Under this approach
the issue of whether the insured has been made whole or fully compensated is a question of law
for the court. 208
NEW MEXICO
New Mexico, while not adopting the traditional made whole doctrine as most other states do,
has come up with a hybrid version of the made whole doctrine. Noting that one persistent
criticism of subrogation is that subrogated insurers will seek reimbursement even when the
insured tort victim has not been fully compensated for all damages, including pain and suffering,
New Mexico recognizes that many states have applied the made whole doctrine, which allows
reimbursement only when the insured has been fully compensated. 209 However, New Mexico
has enacted something referred to as the “doctrine of equitable apportionment.” 210 The doctrine
of equitable apportionment reduces the amount reimbursed to the subrogated insurer when the
insurer’s recovery represents only a portion of the actual damages. Instead of the “all or
nothing” effect of the made whole doctrine, a doctrine of equitable apportionment results in a
fairer result where the subrogation interest is reduced proportionately to the reduction of the
insured’s total claim. 211
NEW YORK
New York has applied and adheres to the existence of the made whole doctrine. 212 An insurer
has no right of subrogation against its insured when the insured’s actual loss exceeds the
amount it has recovered from both the insurer and the third party. 213 Where there are multiple
205 Providence Wash. Ins. Co. v. Hogges, 171 A.2d 120, 124 (N.J. 1961); Culver v. Ins. Co. of North Am.,
559 A.2d 400 (N.J. 1989).
206 Providence Wash. Ins. Co. v. Hogges, 171 A.2d 120, 124 (N.J. 1961).
207 Culver v. Ins. Co. of N. Am., 559 A. 2d 400 (N.J. 1989).
208 Werner, supra.
209 Amica Mut. Ins. Co. v. Maloney, 903 P.2d 834 (N.M. 1995).
210 Id.
211 Id.
212 Winkelmann v. Excelsior Ins. Co., 626 N.Y.S.2d 994 (1995); U.S. Fid. & Guar. Co. v. Maggiore, 749
N.Y.S.2d 555 (2002).
213 Id.
Last Updated 11/26/2008 27

plaintiffs, each insurer needs only to establish that its individual insured has been made whole
before subrogation is allowed. 214 It seems, however, that the made whole doctrine is applicable
only to situations in which the insured makes a recovery and the subrogated insurer is seeking
reimbursement from the insured and out of that recovery. An insurer's action based on partial
subrogation through its insured will not necessarily interfere with the insured's right to be made
whole by the tortfeasor and the insurer need not delay its subrogation claim against the third
party to avoid impairing the insured's rights. 215
The court in Winkelmann introduced the made whole doctrine to New York in the context of
equitable subrogation, and the court in Maggiore extended the doctrine to contractual
subrogation as well. It therefore appears that the equitable considerations, not the intent of the
parties as evidenced by the terms of the policy, will govern in New York.
Court applies “make whole” rule despite a subrogation clause to the contrary, noting that
allowing subrogation where insured is not fully compensated would be “contrary to the principal
purpose of an insurance contract: to protect an insured from loss, thereby placing the risk of
loss on the insurer [though] the insurer has accepted payments from the insured to assume this
risk of loss.” 216
NORTH CAROLINA
North Carolina has discussed the made whole doctrine once, in the case of St. Paul Fire &
Marine Ins. Co. v. W.P. Rose Supply Co. 217 In that case, the court held that:
The great weight of authority is ... that, when the loss exceeds the insurance, as the cause
of action is indivisible and the right of the insurer is not because of any interest in the
property destroyed or damaged, and is enforced upon the equitable principle of
subrogation, the action must be brought by and in the name of the owner of the property,
and that he is entitled to recover the entire damages, without diminution on account of the
insurance, And that he holds the recovery first to make good his own loss, and then in
trust for the insurer ...’ 218
Ironically, North Carolina does not mention the subject again or give us any guidance as to how
it is to be applied, if at all. W.P. Rose is a purely equitable subrogation case with no contractual
analysis in its opinion. When the sum recovered by the insured is less than the total loss, the
loss should be borne by the insurer. 219
NORTH DAKOTA
North Dakota has not adopted the made whole doctrine either for subrogation generally or with
respect to the subrogation rights of health insurers and health Plans.
214 Maggiore, supra.
215 Id.
216 Maggiore, supra. (quoting 16 Couch, Insurance 3d, § 223:136, at 152-153).
217 St. Paul Fire & Marine Ins. Co. v. W.P. Rose Supply Co., 198 S.E.2d 482 N.C. App. 1973).
218 Id. at 485 (citing Powell & Powell v. Wake Water Co, 88 S.E.2d 426 (N.C. 1916)).
219 St. Paul Fire & Marine Ins. Co. v. W. P. Rose Supply Co., 198 S.E.2d 482 (N.C. Ct. App. 1973); see
also 11 N.C.A.C. 12.0319 (prohibiting subrogation clause in life, accident and health insurance policies).
Last Updated 11/26/2008 28

OHIO
Ohio courts enforce the made whole doctrine. 220 An insurer’s subrogation interest will not be
given priority where doing so will result in less than a full recovery to the insured. 221 However,
the made whole doctrine in Ohio may be disclaimed by the policy or Plan language. 222
Sometimes known as the “full compensation rule,” Ohio has followed the more logical although
minority approach among states, and held that cases of contractual interpretation should not be
decided on the basis of what is just or equitable, even where a party has made a bad bargain,
contracted away all of his rights, or has been left in the position of doing the work while another
may benefit from the work. 223 Ohio bases this position on the Federal Made Whole Doctrine,
quoted extensively in the following chapter. The Federal Made Whole Doctrine is based upon
“general equitable principles of insurance law that, absent an agreement to the contrary, an
insurance company may not enforce a right to subrogation unless the insured has been fully
compensated for his or her injuries, that is, has been made whole.” 224
In Peterson v. Ohio Farmers Insurance Co., 225 the Ohio Supreme Court considered a
subrogation dispute which arose out of fire damage to the insured's barn. The insurance
company, Ohio Farmers, paid the insured $7,814 on a real and personal property claim
stipulated to be in excess of $17,629. The insureds, upon receipt of the proceeds, signed a
proof-of-loss and executed the insurer's standard subrogation receipt. Thereafter, both jointly
filed a petition against the third party claiming that the insured's loss was $17,629.56. A joint
verdict in favor of both parties against the tortfeasor was subsequently returned in the amount of
$11,514 and judgment was entered. Thereafter, a dispute arose between the insured and
insurer as to the division of the proceeds of the judgment. The Supreme Court determined that
the key to resolving the dispute was to be found in the language of the subrogation provision of
the policy and the subrogation receipt signed by the insured. According to the court the
language providing that the insured “hereby subrogates said Insurance Company, to all of the
rights, claims and interest which the undersigned may have” conveyed every bit of the insured's
rights of recovery up to $7,814. Therefore, the insurer being the owner of all the rights of the
insured “must have priority in payment out of the funds recovered.” Ultimately the court
concluded that an insurer who has cooperated and assisted against the tortfeasor is entitled to
be compensated first out of the proceeds of any recovery where the subrogation provision or
receipt conveys all of the rights of recovery to the extent of payment by the insurer.
Three decades later, the Ohio Supreme Court revisited the issue of priority of rights in the
context of health insurance in Blue Cross & Blue Shield Mutual of Ohio v. Hrenko. 226 The court
reiterated its position that the dispositive consideration was the language of the policy or
subrogation receipts. While the court found the language of the policy to be clear, unambiguous
and enforceable, it was also influenced by the fact that the insured had received the full benefits
220 Huron County Bd. of Comm’rs v. Sounders, 775 N.E.2d 892 (Ohio App. 2002).
221 Porter v. Tabern, 1999 WL 812357 (Ohio App. 1999) (unreported decision).
222 N. Buckeye Educ. Council Group Health Benefits Plan v. Lawson, 798 N.E.2d 667 (Ohio App. 2003),
motion to certify allowed by, N. Buckeye Educ. Council Group Health Benefits Plan v. Lawson, 800
N.E.2d 749 (Ohio 2003), judgment aff’d by, N. Buckeye Educ. Council Group Health Benefits Plan v.
Lawson, 814 N.E.2d 1210 (2004), reconsideration denied by, N. Buckeye Educ. Council Group Health
Benefits Plan v. Lawson, 818 N.E.2d 712 (Ohio 2004).
223 Ervin v. Garner, 267 N.E.2d 769 (Ohio 1971).
224 Barnes v. Indep. Auto. Dealers of California, 64 F.3d 1389 (9 th Cir. 1995); Galusha v. Pass, 2003 WL
859083 (Ohio App. 2003) (unreported decision).
225 191 N.E.2d 157 (Ohio 1963).
226 647 N.E.2d 1358 (Ohio 1995).
Last Updated 11/26/2008 29

of his bargain. Consequently, the court concluded that pursuant to the terms of the policy, an
insurer who has paid benefits to its insured and has been subrogated to the rights of its insured
may enforce that right after the insured receives full compensation.
In subsequent opinions involving health insurance subrogation disputes courts of appeals have
construed the relevant analysis to turn on an examination of the policy language and a
consideration of whether the insured had been made whole. Whether the insured had received
complete compensation however, ultimately was accorded greater weight in the analysis and
became the dispositive consideration. 227
The court explained the critical nature of the requirement that the insured be made whole before
the insurer can assert its subrogation right in Central Reserve Life Insurance Co. v. Hartzell. 228
In Central Reserve, the Court of Appeals went further than any court before and declared that
any attempt by the insurer to claim priority over a partially compensated insured via a
subrogation clause was “unenforceable and contrary to public policy.” Thus, the court concluded
that it is contrary to the public policy of Ohio to allow an insurer to contractually establish priority
over an insured's claim before the latter has been made whole.
In 2006, the Ohio Court of Appeals confirmed the made whole doctrine was a defense to
subrogation which could only be asserted by the insured, and only in certain situations. 229 The
“make-whole” doctrine provides that “unless the terms of a subrogation agreement clearly and
unambiguously provide otherwise, a health insurer’s subrogation interests will not be given
priority where doing so will result in less than a full recovery to the insured.” 230 In Wilson v.
Sanson, a health plan paid $141,000 in benefits to two plan beneficiaries injured in an
automobile accident. The third party tortfeasor carried only $100,000 in liability policy limits, so
the plan beneficiaries’ underinsured motorist carrier made substitute payments for the $100,000
limits and preserved its right of subrogation against the third party. However, the UIM carrier
was not aware of the health plan’s lien, and later argued that the lien should not be repaid out of
the $100,000 third party limits because the plan beneficiaries were not “made whole.” The Ohio
Court of Appeals stated that the made whole doctrine only applies to an “insured” that has not
been made whole. It does not apply to an insurance company. Thus, the UIM carrier did not
have any standing to assert this claim. The Court also noted that the plan beneficiaries’ claims
against the third party was settled and dismissed with prejudice. The third party also signed a
release with the UIM carrier. Thus, there was some evidence tending to prove that the Wilsons
were fully compensated for their injuries. 231 Interestingly, the Court found that both the UIM
carrier and the health plan had equal subrogation rights to the $100,000 third party proceeds.
The UIM carrier had subrogation rights under the Ohio UM statute. 232 The fully insured health
plan had subrogation language which read as follows:
“To the extent we provide or pay benefits for covered Medical Services, your legal rights
to claim or receive compensation damages or other payment for that same illness or injury
is transferred to us.”
227 Huron County Bd. of Comm'rs v. Saunders, 775 N.E.2d 892, 897 (Ohio Ct. App. 2002); Grine v.
Payne, No. WD-00-044, 2001 Ohio App. LEXIS 1342, at *8 (Ohio Ct. App. 2001); Cent. Reserve Life Ins.
Co. v. Hartzell, No. 94AP120094, 1995 Ohio App. LEXIS 6027, at *5 (Ohio Ct. App. 1995).
228 1995 Ohio App. LEXIS 6027, at *7.
229 Wilson v. Sanson, 2006 WL 3446213 (Ohio App. 2006).
230 Lawson, supra.
231 Id.
232 R.C. §3937.18(J).
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The Federal Made Whole Doctrine says that when the language of an ERISA Plan is silent or
ambiguous as to subrogation or reimbursement rights, Federal Common Law requires that the
insured be made whole before the insurer can recover. 233 Therefore, Ohio has borrowed from
the Federal Made Whole Doctrine to craft the Ohio made whole rule, which is that the health
insurer can opt out of this “default” made whole doctrine by using specific and clear language in
its Plan that establishes both a priority to recovered funds and a right to full or partial
recovery. 234 Language providing a health insurer with a right to the proceeds of “any recovery”
from a third party has been held to be sufficient to overcome the made whole doctrine. 235
Likewise, if the Plan provides for an apportionment scheme in the event that the third party
tortfeasor has insufficient insurance or means to satisfy a judgment for all of the damages
suffered by the insured, then these contract provisions will govern and the recovery will be
apportioned. 236 In addition, if the insured has interfered with the insurer’s subrogation rights,
then the “make whole” doctrine does not apply. 237
The Ohio Supreme Court has clearly indicated that clear and unambiguous language allows
subrogation even where the insured is not fully compensated. 238
OKLAHOMA
Oklahoma first considered application of the made whole doctrine in 1996 and with regard to an
ERISA Plan. 239 Where the ERISA Plan’s subrogation or reimbursement terms neither expressly
set a priority for repayment of benefits, nor otherwise give the right to subrogation or
reimbursement before any funds are paid to the beneficiary, the made whole doctrine will
apply. 240
In 2000, an Oklahoma Court of Appeals applied the made whole doctrine for the first time to a
non-ERISA Plan. 241 It declared that the reimbursement and subrogation provisions of a group
health Plan were unenforceable unless the Plan beneficiary was fully compensated by the
tortfeasor. 242 The court did give some wiggle room, however, and implied that if there was a
“priority-of-payment provision,” the result might be different. 243
The made whole doctrine in Oklahoma has been described as prohibiting an insurer from
recouping anything by way of subrogation or reimbursement until the insured has been made
entirely whole for recovery of all compensatory damages to which he is entitled. 244 When there
is a settlement, evidence must be proffered by the insurer as to the elements of damages
recovered in and represented by the settlement funds. Where the record before the trial court
contains no such evidence, it is not possible to determine whether or not the Plan beneficiary
has been made whole. 245
233 th
Copeland Oaks v. Haupt, 209 F.3d 811 (6 Cir. 2000).
234 th
Hiney Printing Co. v. Brantner, 243 F.3d 956 (6 Cir. 2001).
235
Risner v. Erie Ins. Co., 633 N.E.2d 588 (Ohio App. 1993).
236
Aetna Life Ins. Co. v. Martinez, 454 N.E.2d 1338 (Ohio App. 1982).
237
Acuff v. Motorists Mut. Ins. Co., 2007 WL 661561 (Ohio App. 2007).
238
Lawson, supra.
239
Equity Fire & Cas. Co. v. Youngblood, 927 P.2d 572 (Okla. 1996).
240
Id; Reeds v. Walker, 2006 WL 1686739 (Okla. 2006).
241
American Medical Sec. v. Josephson, 15 P.3d 976 (Okla. Civ. App. 2000).
242
Id.
243
Id.
244 th
Sunbeam-Oster Co., Inc. Group Ben. Plan v. Whitehurst, 102 F.3d 1368 (5 Cir. 1996).
245 Josephson, supra.
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Unlike the case in Georgia, 246 simply because a Plan beneficiary settles and executes a release
in Oklahoma, doesn’t mean that he has been “fully compensated” or “made whole” as a matter
of law. 247 A settlement in Oklahoma does not necessarily represent an injured party’s actual or
total compensatory damages. 248 There is still ample authority in Oklahoma to the effect that the
made whole doctrine may be overridden by specific contract terms in a policy or Plan. 249 The
Oklahoma Supreme Court has indicated that the following plan reimbursement language was
not sufficient to overcome the made whole doctrine:
When We pay benefits under the Plan and it is determined that a third party is liable for
the same expenses, We have the right to subrogate from the monies payable from the
third party equal to the amount We have paid for such benefits. You must reimburse Us
from any monies recovered form (sic) a third party as a result of a judgment against or
settlement with or otherwise paid by the third party. You must take action against the third
party, furnish all the information and provide assistance to Us regarding the action taken,
and execute and deliver all documents and information necessary for Us to enforce Our
rights of subrogation. 250
The court in Reeds set a new priority-of-payments standard. An insurance contract stands
subject to the make-whole rule unless it contains an unequivocal, express statement that the
insured does not have to be made whole before the insurer is entitled to recoup its payments. 251
Addressing the enforceability of subrogation provisions in the context of an ERISA claim, the
Oklahoma Supreme Court has held that where the plan does not specifically provide that insurer
is entitled to priority of payment and does not expressly give its managers the right to resolve
ambiguities, and where the facts do not clearly show that the beneficiary's settlement included
reimbursement for medical expenses, the plan will not be allowed to recover unless insured is
made whole. 252
OREGON
Oregon has not yet adopted the made whole doctrine. On June 9, 2004, an Oregon Court of
Appeals held that subrogation is an equitable doctrine which is based on a theory of restitution
and unjust enrichment, and enables a secondarily liable party who has been compelled to pay a
debt to be made whole by collecting that debt from the primarily liable party, who, in good
conscience, should be required to pay it. 253 This case, however, doesn’t go quite as far as
establishing the made whole doctrine in Oregon or requiring that the insured be made whole
before subrogation can be effected. Although not specifically identifying the made whole
doctrine by name, one might argue that Oregon implies that an insured must be made whole
246 Thompson v. Fed. Express Corp., 809 F. Supp. 950 (M.D. Ga. 1993).
247
Id.
248
Price v. Southwestern Bell Tel. Co., 812 P.2d 1355 (Okla. 1991).
249
Williams & Miller Gin Co. v. Baker Cotton Oil Co., 235 P. 185, 187 (Okla. 1925); Reeds v. Walker,
2006 WL 1686739 (Okla. 2006); Fields v. Farmers Ins. Co., 18 F.3d 831 (10 th Cir. 1994) (applying
Oklahoma law).
250
Reeds v. Walker, 2006 WL 1686739 (Okla. 2006).
251
Id.
252
Equity Fire and Cas. Co. v. Youngblood, 927 P.2d 572 (Okla. 1996); see also American Med. Sec. v.
Josephson, 15 P.3d 976 (Okla. Civ. App. 2000) (holding that, in the absence of a priority-of-payment
provision, subrogation clause is unenforceable unless insured has been fully compensated).
253
Koch v. Spann, 92 P.3d 146 (Or. App. 2004).
Last Updated 11/26/2008 32

efore an insurer may proceed with subrogation. 254 Until they specifically adopt the doctrine,
however, you should maintain that such a doctrine does not exist under Oregon law.
With regard to PIP subrogation and reimbursement in Oregon, § 742.544 provides for a
statutory form of the made-whole rule:
(1) A provider of personal injury protection benefits shall be reimbursed for personal injury
protection payments made on behalf of any person only to the extent that the total amount
of benefits paid exceeds the economic damages as defined in ORS 31.710 suffered by
that person. As used in this section, “total amount of benefits” means the amount of
money recovered by a person from:
(a) Applicable underinsured motorist benefits described in ORS 742.502 (2);
(b) Liability insurance coverage available to the person receiving the personal injury
protection benefits from other parties to the accident;
(c) Personal injury protection payments; and
(d) Any other payments by or on behalf of the party whose fault caused the
damages.
(2) Nothing in this section requires a person to repay more than the amount of
personal injury protection benefits actually received. 255
PENNSYLVANIA
Pennsylvania recognizes and applies the made whole doctrine, although not very
aggressively. 256 Nevertheless, an insurer is generally not entitled to exercise a right to
subrogation until its insured has been fully compensated for the insured’s injuries. 257 However,
there do not appear to be any cases which apply the made whole doctrine to health insurance
subrogation cases. 258 In Pennsylvania, an insurer's subrogation rights are not superior to the
rights of an insured because subrogation does not arise until the insured has been made
whole. 259 This rule of law has been sporadically applied by Pennsylvania courts to both
equitable and contractual subrogation. 260 The made whole doctrine is also applicable to
statutory subrogation disputes in the absence of a legislative intent to displace the rule. 261 In
implementing the made whole doctrine, courts allow a subrogation recovery from the insured in
the amount by which the sum received by the insured from the tortfeasor, together with the
insurance payments made, exceeds the loss and expense incurred by the insured in realizing
the claim against the wrongdoer. 262 Pursuant to this measure, the expenses of making the
recovery from the wrongdoer, including attorneys' fees, must be taken into account in
determining whether the insured has any excess recovery to which the insurer would be entitled
under the doctrine of subrogation. 263 However, there is authority for the proposition that when
the insured settles with the tortfeasor the settlement conclusively establishes the settlement
254
Id.
255
O.R.S. § 742.544 (1993).
256
Nationwide Mut. Ins. Co. v. DiTomo, 478 A.2d 1381 (Pa. Super. 1984).
257
Lexington Ins. Co. v. Q-E Mfg. Co., Inc., 2006 WL 2136244 (M.D. Pa. 2006) (unreported decision).
258
Watson v. Allstate Ins. Co., 28 F.2d 942 (M.D. Pa. 1998); DiTomo, supra.
259
DiTomo, supra.
260
Gallop v. Rose, 616 A.2d 1027 (Pa. Super. Ct. 1992).
261
City of Meadville v. Workers' Comp. Appeal Bd., 810 A.2d 703, 706 (Pa. Commw. Ct. 2001).
262
Nationwide Mut. Ins. Co. v. Butler, 28 Pa. D. & C.3d 627, 630 (Pa. Com. Pl. 1983).
263
Nationwide Mut. Ins. Co. v. Kintz, 27 Pa. D. & C.3d 164 (Pa. Com. Pl. 1983); Associated Hosp. Serv.
v. Pustilnik, 439 A.2d 1149 (Pa. 1981).
Last Updated 11/26/2008 33

amount as full compensation. 264 There is a line of cases in Pennsylvania which provides that
when an injured party settles with the tortfeasor he waives his right to a judicial determination of
his losses and conclusively establishes the settlement amount as full compensation for his
damages. In those situations, it has been held that the insurance company has a right of
subrogation attaching to the amount of the settlement. 265
Court holds that insurer’s claim against insured which sought subrogation of money that the
insured had received from insurer of tortfeasor involved in auto collision failed to state a claim
where the insured had not been made whole. The right to subrogation does not even arise until
the insured has been made whole. 266
RHODE ISLAND
The made-whole doctrine was first applied in Rhode Island in 1981 in the context of automobile
insurers’ claims for a share in the proceeds of a safety responsibility bond obtained by the
uninsured motorist tortfeasor. 267 In Lombardi v. Merchants Mutual Insurance Co., the Supreme
Court of Rhode Island concluded that the right of subrogation did not arise until the insured had
received full compensation. Lombardi, however, was subsequently distinguished by the lower
state court in Ditomasso v. Ocean State Physicians Health Plan, Inc. Therein the court found an
unambiguous subrogation provision which displaced the made whole rule enforceable.
According to the court in Ditomasso:
Lombardi is inapplicable to and distinguishable from the case at bar. First, Lombardi
addressed the issue of subrogation rights as applicable to general liability insurers. Here,
the defendant is a health insurer. Second, the Court in Lombardi held that the defendant
insurance companies subrogation rights did not arise until the plaintiffs had received full
satisfaction of the judgment against the uninsured. Plaintiff in the instant matter has not
received a judgment from any court but rather has been paid $ 25,000 (the policy limit)
from her uninsured motorist coverage. 268
Although the Supreme Court in Lombardit applied the made-whole doctrine and rejected the
automobile insurers’ claims for a share in the proceeds of a safety responsibility bond obtained
by the uninsured motorist tortfeasor unless the insureds’ loss (stated in their judgment against
the tortfeasor), was fully paid, the application of the made-whole doctrine in that case appears to
be limited to motor vehicle accidents and common law principles of surety. The victim in
Lombardi obtained a $32,000 judgment against the wrongdoer. Two insurance companies had
each paid the victim $10,000. The companies sought recovery of the funds they had advanced
out of a $10,000 bond posted by the wrongdoer to secure the judgment. The court, citing Justice
Cardozo, reiterated the principle that a surety is liable only for part of the debt that does not
become subrogated to collateral or to remedies available to the creditor unless he pays the
264 Butler, supra.
265 Illinois Auto Insurance v. Braun, 421 A.2d 1074 (Pa. 1982).
266 Nationwide Mut. Ins. Co. v. DiTomo, 478 A.2d 138 (Pa. Super. 1984).
267 Lombardi v. Merchants Mut. Ins. Co., 429 A.2d 1290 (R.I. 1981); but see Ditomasso v. Ocean State
Physicians Health Plan, Inc., No. 87-2487, 1988 WL 1016798 (R.I. Super. 1988) (distinguishing
Lombardi, and holding that insured has enforceable right to subrogation where the language of the
contract regarding subrogation is clear and unambiguous).
268 Lombardi, supra.
Last Updated 11/26/2008 34

whole debt or it is otherwise satisfied. 269 Thus, Lombardi concluded, the insurance company
was not subrogated to the victim's right until the "total judgment was satisfied."
Rhode Island appears to disallow contractual limitations or subrogation provisions that curtail an
insured's recovery in instances in which the insured has not recovered the amount of his or her
actual loss. 270
SOUTH CAROLINA
South Carolina case law does not discuss application of the made whole doctrine. However, a
hybrid of the made whole doctrine is enforced in South Carolina with regard to health insurance
subrogation through the application of § 38-71-190. 271 This statute provides that a health insurer
may recover no more than “the amount of insurance benefits that the insurer has paid
previously in relation to the insured’s injury by the liable third party.” 272 Therefore, this statute
allows for a “pro rata” subrogation right by the health insurer, instead of the more harsh
application of the “all or nothing” made whole doctrine. However, this statute also contains a
catch all that if the director, 273 or his designee, upon being petitioned by the insured, determines
that the exercise of subrogation by an insurer is inequitable and commits an injustice to the
insured, subrogation is not allowed. 274 Therefore, under the appropriate fact circumstances, the
traditional effect of the made whole doctrine could be applicable in South Carolina as well. Other
than the above statute, however, South Carolina does not appear to apply the made whole
doctrine.
SOUTH DAKOTA
In South Dakota the made whole doctrine is a default rule subject to the right of the parties to
agree otherwise. 275 The agreement need not be specific or use the magical phrase “made
whole.” Rather, the South Dakota Supreme Court has adopted a plain meaning approach to
reach the conclusion that general subrogation language is sufficient to displace the doctrine. 276
In Rowe, the Supreme Court noted that subrogation rights may arise independent of the made
whole doctrine, especially where a policy or Plan specifically provides for the right of
subrogation without a requirement that the insured be made whole. 277 Therefore, it appears that
South Dakota meekly applies the made-whole doctrine, but it can be overcome by simple
subrogation language in a policy which does not require application of the made-whole
doctrine. 278
In Julson v. Federated Mut. Ins. Co., a property insurer paid property damages to its insured
and then settled a subrogation suit with the tortfeasor without the insured having been made
269 Lombardi, 429 A.2d at 1292 (quoting American Surety Co. v. Westinghouse Electric Mfg. Co., 296
U.S. 133, 137, 56 S.Ct. 9, 11, 80 L.Ed. 105 (1935) (Cardozo, J.)).
270 DiTata v. Aetna Cas. and Sur. Co., 542 A.2d 245 (R.I. 1988).
271 S.C. St. § 38-71-190.
272
Id.
273
Defined in § 38-1-2 as “a person who is appointed by the governor upon the advise and consent of the
Senate and who is responsible for the operation and management for the Department of Insurance.”
274
S.C. St. § 38-71-190.
275
Westfield Ins. Co., Inc. v. Rowe, 631 N.W.2d 175 (S.D. 2001).
276
Id.
277
Westfield, supra.
278
Id; Julson v. Federated Mut. Ins. Co., 562 N.W.2d 117 (S.D. 1997).
Last Updated 11/26/2008 35

whole. 279 Significant, however, is the fact that the court noted that the pool of funds awarded
from the third party tortfeasors was not shown to be inadequate to make all parties whole.
However, the court also pointed out that the policy specifically provided for the carrier's right to
subrogation after making full payment to Julson as required by its contract, and that there was
no clause in the policy requiring the insured to be made whole before subrogation could arise or
at the time any settlement is made with any third party tortfeasors.
Under the South Dakota approach, the absence of language in the policy or statute that limits
the right of subrogation to instances where the insured has been made whole evidences the
parties' intent to dispense with the default rule.
TENNESSEE
Tennessee has applied the made-whole doctrine since 1979. 280 The Supreme Court in
Wimberly established that the right of an insured to be made whole before subrogation rights
could be enforced could not be waived or modified by the insurance policy. Whether an insurer’s
right of subrogation is contractual or equitable only comes into play to determine “whether there
is a right of subrogation in the first instance, rather than in the enforcement of such right.” 281
While an insurer can not contractually modify the common law made whole rule, a failure on the
part of the insured to obtain contractually required permission of the insurer to a settlement
preserves the latter's subrogation rights even if the insured is not made whole. 282 Thus, where
the insurer does not participate in the settlement negotiations between its insured and the
tortfeasor or does not waive any subrogation rights, such rights must be honored and the made
whole doctrine is inapplicable. This exception to the made whole rule is subject however, to a
further caveat which provides that if the parties agree that the insured has not been made whole
or the underlying facts make clear that the recovery is for less than full compensation, the
insurer's subrogation claim is extinguished. 283
The made-whole doctrine applies in both legal and conventional subrogation or reimbursement
disputes between insurers and their insureds. 284 Thus, where the issue of whether the insured
has been made whole is raised at the trial level the insurer's subrogation claim is stayed until
this issue is resolved.
Tennessee recognizes two methods for determining the subrogation rights of insurers in the
context of statutory subrogation disputes. The primary objective of the court under both
frameworks is to identify and give effect to the intent and purpose of the legislature. 285 Under
279
562 N.W.2d 117 (S.D. 1997).
280
Wimberly v. Am. Cas. Co. of Reading, Pa.., 584 S.W.2d 200 (Tenn. 1979); York v. Sevier County
Ambulance Auth., 8 S.W.3d 616 (Tenn. 1999); Abbott v. Blount County, 207 S.W.3d 732 (Tenn. 2006).
281
Id.
282
Eastwood v. Glens Falls Ins. Co., 646 S.W.2d 156, 158 (Tenn. 1983); Rader v. Traylor, No. 03A01-
9403-CV-00079, 1994 Tenn. App. LEXIS 418, at *4-5 (Aug. 1, 1994).
283
Doss v. Tenn. Farmers Mut. Ins. Co., No. M2000-01971-COA-R3-CV, 2001 Tenn. App. LEXIS 906, at
*10-11 (Dec. 10, 2001).
284
Health Cost Controls, Inc. v. Gifford, 108 S.W.3d 227, 231 (Tenn. 2003); York v. Sevier County
Ambulance Auth., 8 S.W.3d 616, 621 (Tenn. 1999); Wimberly v. Am. Cas. Co., 584 S.W.2d 200, 203
(Tenn. 1979).
285
Blankenship v. Estate of Joshua, 5 S.W.3d 647, 651 (Tenn. 1999); see, e.g., Castleman v. Ross
Eng'g, Inc., 958 S.W.2d 720, 724 (Tenn. 1997); Graves v. Cocke County, 24 S.W.3d 285, 289 (Tenn.
2000).
Last Updated 11/26/2008 36

one analysis, if the statute merely creates a subrogation right without embracing or abandoning
the made whole rule the court is prone to conclude that the legislature “intended for the statute
to reflect the equitable principle that subrogation is subject to the made whole doctrine.” 286 This
method is based on the idea “that subrogation is founded upon principles of equity and ‘not
dependent upon statute or custom or ... contract.”’ 287 The second method is used when the
statute provides an insurer with a statutory lien, such as in workers’ compensation. Pursuant to
this analysis, a statutory lien is not subject to the equitable requirement that the insured be
made whole. 288
A health insurer’s contractual right to subrogation and reimbursement are both subject to the
made whole doctrine. 289 The argument that the insurer may contract away the need for the
insured to be made whole is dispatched by the Tennessee Supreme Court as follows:
The fallacy in this contention is that it presumes the plaintiffs had the bargaining power,
leverage, or business acumen to negotiate the terms of this or any other standardized
insurance contract. Moreover, it also presumes that the insured party knew or should
reasonably have known of the “made whole” doctrine or this court’s prior holdings that
subrogation is subject to an insured’s being made whole. 290
However, it is the insured in Tennessee who has the burden of proving that he is not made
whole by a particular settlement or recovery. 291 An insured must be made whole for damages
before an insurer is entitled to either subrogation or reimbursement, even if the insurer claims
that it made a payment because it did not know of a third party’s liability. 292 This is true
regardless of the language in the insurance policy or health Plan. 293 It is also true regardless of
whether the Plan is asserting a right of subrogation or a right of reimbursement. 294 Whether an
insured has been made whole is a matter of fact, upon which the insured has the burden of
proof. 295 Furthermore, whether or not an insured has been made whole must be determined by
considering all benefits and recoveries received as a result of an incident. 296 Basically, this case
means that if the insured recovers $100,000 and there is a lien of $101,000, it is not presumed
that the insured has not been made whole. Instead, the court would say that the plaintiff
suffered a minimum of $101,000 in damages but received $201,000 in compensation, improving
the chances of recovery in spite of the made whole argument.
It should be noted that where an insured settles directly with a tortfeasor, with full knowledge of
an insurer’s subrogation rights, and that settlement, together with the benefits paid under the
insurance policy, do not make the insured whole, no subrogation will be allowed because the
insured was not made whole. 297 In the absence of a judgment or jury verdict establishing a
286 Blankenship, supra.
287 Wimberly, supra.
288 Castleman, supra.; Graves, supra.
289 York, supra.
290
Id.
291
Hamrick’s, Inc. v. Roy, 115 S.W.3d 468 (Tenn. App. 2002); Nelson v. Innovative Recovery Serv., Inc.,
2001 WL 1480515 (Tenn. App. 2001) (unreported decision); Abbott, supra. .
292
Healthcost Controls, Inc. v. Gifford, 108 S.W.3d 227 (Tenn. 2003).
293
Id; Blount, supra.
294
Simpson v. Doe, 2006 WL 1627292 (Tenn. App. 2006).
295
Healthcost Controls, Inc., supra.
296
Health Cost Controls, Inc. v. Gifford, 239 S.W.3d 728 (Tenn. 2007).
297
Wimberly v. Am. Cas. Co. of Reading, Pa., 584 S.W.2d 200 (Tenn. 1979); Tennessee Farmers Mut.
Ins. Co. v. Farmer, 1998 WL 695637 (Tenn. App. 1998) (unreported decision).
Last Updated 11/26/2008 37

specific dollar value of each element of an injury, a court can make an equitable determination
as to whether an injured party has been made whole. 298 Ordinarily, the injured party may make
such determination by settlement. Failing that, it may be made by the jury or by the judge. 299 In
extraordinary circumstances, equity may intervene and make such a determination. 300
In Abbott v. Blount County, the Tennessee Supreme Court determined that insurers may not
bind insureds’ rights to settlements by using artful contract terms because “[c]ontract terms that
require the consent of the insurer would allow the insurer to withhold consent from any
settlement that does not make the insured whole and thereby compel the insured to seek a
larger award at trial.” 301
TEXAS
In Ortiz v. Great Southern Fire & Casualty Ins. Co., 302 the Texas Supreme Court ingrained in
Texas jurisprudence the made whole doctrine. However, the extent and breadth of that case
has been grossly misunderstood, and in 2007, the Texas Supreme Court clarified that the terms
of a plan or policy can negate the application of the doctrine. 303 If a contract provides for
subrogation regardless of whether the insured is first made whole, the contract's specific
language controls and the equitable defense of the “made whole” doctrine must give way. 304
The Ortiz case is one of the most misconstrued cases in Texas jurisprudence. Ortiz has never
stood for the blanket proposition that an insurance company’s right of subrogation may not be
exercised unless and until the insured is made whole. 305 In fact, it points out that if any part of a
third party settlement is intended as compensation for damages which represent the insurance
payment made by a subrogating insurer, the insurer is entitled to subrogation.
In Ortiz, a homeowner suffered $15,000 in damage after a negligent carpet installation started a
fire. This damage included $4,000 in damage to real property which was covered under a Great
Southern policy, and $11,000 in damage to personal property, which was not insured at all. The
insured settled with the third party for $10,000, and Great Southern asserted a $4,000 equitable
subrogation interest in the $10,000 settlement. Neither the settlement agreement nor any proof
submitted to the court indicated which portion of the damages paid by the third party tortfeasor
related to or represented the benefits paid by Great Southern. The trial court and appellate court
held that Great Southern was entitled to subrogation, notwithstanding the Ortiz’ claim that they
weren’t made whole. The Supreme Court reversed, but did not affirmatively find that the amount
recovered by an insured from his insurer and a third party tortfeasor combined must exceed the
damages for the insured and uninsured property before the insurer is entitled to subrogation. 306
To the contrary, the Texas Supreme Court held that if any portion of a settlement is intended as
compensation for damages paid by the insurer, the insurer is entitled to subrogate after paying a
pro rata share of the costs of collection. 307 Because the record in Ortiz did not reflect how much
298 Farmer, supra.
299
Id.
300
Id.
301
207 S.W.2d 732 (Tenn. 2006).
302
Id.
303
Fortis Benefits v. Vanessa Cantu and Ford Motor Co., 234 S.W.3d 642 (Tex. 2007) (Successful
Amicus Curiae Brief on behalf of National Association of Subrogation Professionals (“NASP”) filed by
Gary L. Wickert); Osborne v. Jauregui, Inc., 252 S.W.2d 70 (Tex. Civ. App. – Austin 2008).
304
Osborne, supra.
305
Veazey v. Allstate Texas Lloyds, 2007 WL 29239 (N.D. Tex. 2007).
306
Ortiz v. Great So. Fire & Cas. Ins. Co., 597 S.W.2d 342 (Tex. 1980).
307 Id.
Last Updated 11/26/2008 38

of a $10,000 settlement, if any, was intended for damages to the insured’s real property,
equitable subrogation was not allowed based on the made whole doctrine.
Texas has specifically rejected adopting the Wisconsin holding in Garrity v. Rural Mutual Ins.
Co., 308 which says that an insurer may not subrogate at all if the insured is not made whole for
all of its losses. 309 In Texas, the burden of proving that the insured has been made whole, or
exactly what portion of a third party settlement satisfies covered as opposed to non-covered
losses, is on the party filing suit. 310 In other words, if a subrogated carrier settles directly with a
third party and the insured must file suit to seek reimbursement from the carrier, the burden is
on the insured. On the other hand, if the insured settles and the carrier must file suit to seek
reimbursement from the insured, the burden will be on the insurance company. 311 One Texas
Court of Appeals decided one unreported case in which it determined that the burden of proof
was on the insurer to show what amount, if any, of any third party settlement agreement is
allocated to the insured’s loss, in order to avoid the made whole doctrine. 312 On the other hand,
in Veazey v. Allstate Texas Lloyds, a federal district court declared that there are some
situations in which an insurance company can subrogate even if the insured is not made whole,
and, in that case, the burden was on the insured to prove what amount, if any, of Allstate’s
recovery from the third party was to be allocated to the uninsured losses. 313 The court held that
Veazey had no right to any payments made by the third party to Allstate for insured damages
already covered by Allstate—only to payments for uninsured damages.
In Fortis Benefits v. Vanessa Cantu and Ford Motor Co., 314 the Texas Supreme Court
specifically and forcefully acknowledged that the made whole doctrine does not apply to
contractual subrogation claims. Effectively overruling Esparza v. Scott & White Health Plan, 315
the Supreme Court confirmed that the application of the made whole doctrine can be summarily
overcome by a boiler-plate provision in an insurance contract that purports to entitle the insurer
to subrogation out of the first monies received by the insured. The Court stated:
We do not disagree that equitable and contractual subrogation rest upon common
principles, but contract rights generally arise from contract language; they do not derive
their validity from principles of equity but directly from the parties’ agreement. The policy
declares the parties’ rights and obligations, which are not generally supplanted by courtfashioned
equitable rules that might apply, as a default gap-filler, in the absence of a valid
contract. If subrogation arises independent of any contract, then an express subrogation
agreement would be superfluous and serve only to acknowledge this preexisting right, a
position we reject…Contractual subrogation clauses express the parties’ intent that
reimbursement should be controlled by agreed contract terms rather than external rules
imposed by the courts. 316
308 Garrity v. Rural Mutual Ins. Co., 253 N.W.2d at 514 (Wis. 1977).
309 Veazey, supra.
310
Id.
311
Id.
312
Phillips Petroleum Co. v. Brantley, 2003 WL 22923413 (Tex. App. - El Paso 2003) (unreported
decision).
313
Veazey, supra.
314
Fortis Benefits v. Vanessa Cantu and Ford Motor Co., 234 S.W.3d 642 (Tex. 2007) (Successful
Amicus Curiae Brief on behalf of National Association of Subrogation Professionals (“NASP”) filed by
Gary L. Wickert).
315
Esparza v. Scott & White Health Plan, 909 S.W.2d 548 (Tex. App. – Austin 1995, writ denied).
316 Fortis Benefits, supra.
Last Updated 11/26/2008 39

The Texas Supreme Court also cited the U.S. Supreme Court decision in Sereboff v. Mid
Atlantic Medical Services 317 as standing for the proposition that the equitable made whole
doctrine should not apply when the Plan specifies to the contrary. The Fortis Benefits decision
correctly points out the clear distinction between equitable subrogation and contractual
subrogation, and allows plan and/or policy language to negate its anti-subrogation effect:
The three varieties of subrogation-equitable, contractual, and statutory-represent three
separate and distinct rights that, while related, are independent of each other.
Independent, however, does not mean co-equal. We generally adhere to the maxim that
“equity follows the law,” which requires equitable doctrines to conform to contractual and
statutory mandates, not the other way around. Where a valid contract prescribes particular
remedies or imposes particular obligations, equity generally must yield unless the contract
violates positive law or offends public policy. This Court has “long recognized a strong
public policy in favor of preserving the freedom of contract.” 318
Nonetheless, there are some instances where an insured is precluded from arguing that he had
not been made whole. For example, when the subrogation provision relied upon by the insurer
is found in a contract executed after the payment of benefits giving rise to the subrogation claim,
i.e. a settlement agreement, the parties waive the made whole doctrine. 319 Also, a jury verdict on
the issue of damages conclusively establishes the amount necessary to make the insured
whole. As a result, an insured is collaterally estopped from arguing otherwise. 320
UTAH
Utah first adopted the made-whole doctrine in 1988. 321 The court in Hill v. State Farm Mutual
Auto Insurance Co also provided that the made-whole doctrine could be modified by contract.
However, the modification, in order to effectively displace the doctrine, must be sufficiently clear
and unambiguous as to put the insured on notice of that fact. 322 General subrogation language
is insufficient to explicitly inform an insured that its insurer has priority of rights even though the
assets of the third party are inadequate to fully compensate the former. 323
The made whole doctrine's application to statutory subrogation disputes depends upon the
court's determination of the legislative intent and purpose of the statute. Equitable principles are
to be employed in determining how the right is to be exercised where the statute merely grants
the insurance carrier the right to subrogation. 324 However, if the statute provides a detailed
statutory scheme governing how an insurer's subrogation right may be exercised and how the
proceeds from an action against the third party are to be distributed, the made-whole doctrine
will not be applicable. 325
317 Sereboff v. Mid Atlantic Medical Services, Inc. 126 S.Ct. 1869 (2006).
318
Fortis Benefits, supra.
319
Rosa’s Café Inc., v. Wilkerson, 183 S.W.3d 483, 488 (Tex. App.—Eastland 2005, no pet.).
320
State Farm Mut. Auto Ins. Co. v. Perkins, 2006 (Tex. App. Lexis 6030(Tex. App.—Eastland, 2006).
321
Hill v. State Farm Mutual Auto Insurance Co., 765 P.2d 864 (Utah 1988).
322
State Farm Auto. Ins. Co. v. Green, 89 P.3d 97, 105 (Utah 2003).
323
Id.
324
Anderson v. United Parcel Serv., 96 P.3d 903, 907 (Utah 2004).
325 Id.
Last Updated 11/26/2008 40

In the absence of express terms to the contrary, an insured must be made whole before the
insurer is entitled to be reimbursed from a recovery from the third party tortfeasor. 326 The madewhole
doctrine will be applied wherever it is not possible from the subrogation terms of the
policy to ascertain the intent of the parties as to the extent of their respective rights under the
subrogation clause. 327 This is in line with Utah’s reasonable interpretation that contractual
subrogation is not an equitable doctrine governed by equitable principles, and can be modified
by contract. 328 Non-contractual subrogation rights (equitable subrogation) will only be enforced
on behalf of a party maintaining a superior equitable position and the insurer’s equitable position
cannot be superior to the insured’s unless the insured has been completely compensated. 329
VERMONT
Vermont is unique among states in that it defines “subrogation” as an equity called into
existence for the purpose of enabling the insurer to be “made whole.” 330 However, Vermont
does not appear to adopt or apply the traditional made whole doctrine for which an insurer may
only seek subrogation rights if the insured has been made whole.
VIRGINIA
In P.R.C., Inc. v. O’Bryan, 331 P.R.C., Inc., sought reimbursement of certain medical and other
expenses which it had paid on behalf of O’Bryan, its employee, under P.R.C.’s salary
continuation and medical reimbursement Plan, when O’Bryan was injured in an automobile
accident. 332 This self-funded Plan operates as a short-term disability policy, and P.R.C. did not
purchase insurance in order to satisfy its obligations under the Plan. The Plan provided, in part:
If you ... sustain a personal injury caused by a third party and P.R.C. pays for medical
treatment related to that injury, then P.R.C. reserves the right to recover the monies it paid
for such treatments and any monies paid by the third party responsible for the injury or the
third party’s insurance company to compensate you for the injury. 333
O’Bryan later executed a reimbursement agreement, by which he agreed to pay or caused to be
paid to P.R.C. out of any such third party recovery up to the $32,918 in short term disability
benefits and medical expenses which his employer had paid under the Plan. O’Bryan filed suit
and asked P.R.C. to participate with him but P.R.C. took no part in the litigation. The suit was
settled for $45,000. O’Bryan received $27,435 in net proceeds after payment of attorney’s fees
and costs, and did not reimburse P.R.C. for any of the expenses P.R.C. paid pursuant to the
Plan. O’Bryan claimed the reimbursement agreement was invalid under § 38.2-3405, but the
court found the Virginia Anti-Subrogation Statute was not applicable in this case because the
Plan was a self-funded employee benefit Plan that was regulated by ERISA. 334 After
determining that the anti-subrogation statute did not apply and P.R.C. could pursue its
subrogation and reimbursement rights, O’Bryan claimed the made whole doctrine prevented
326 Id.
327 Id.
328 Id; Birch v. Fire Ins. Exch., 122 P.3d 696 (Utah App. 2005); Hill, supra.
329 Trans American Ins. Co. v. Barnes, 505 P.2d 783 (Utah 1973).
330 Norfolk & Debham Fire Ins. Co. v. Aetna Cas. & Sur. Co., 318 A.2d 659 (Vt. 1974).
331 P.R.C., Inc. v. O’Bryan, 1998 WL 972277 (Va. Cir. Ct. 1998) (unpublished opinion).
332 Id.
333 Id.
334 Id.
Last Updated 11/26/2008 41

P.R.C. from subrogating. The court rejected this argument because P.R.C. was seeking
reimbursement and not subrogation and the made whole argument because P.R.C.’s express
contractual subrogation right to any monies paid to O’Bryan from any third party tortfeasor
overrode the made whole doctrine. The court noted that other cases have held a reference in a
subrogation clause that the insurer is subrogated to “any” or “all” rights of recovery overrides the
made whole doctrine. 335 There is authority in the Virginia case law for the proposition that the
made whole doctrine may be overridden by specific policy language to the contrary. 336
WASHINGTON
Washington adheres to the made whole doctrine. 337 An injured party must be made whole
before the injured party’s insurer may require the injured party to reimburse the insurer for a
subrogation or reimbursement claim. 338 Known as the Thiringer Doctrine, 339 the general rule is
that while an insurer is entitled to be reimbursed to the extent that its insured recovers payment
for the same loss from the tortfeasor responsible for his damage, it can recover only the excess
which the insured has received from the wrongdoer, remaining after the insured is fully
compensated for his loss. 340 However, the Thiringer case indicates the Thiringer Doctrine may
be overridden by specific Plan or policy language to the contrary. 341
The insurance policy in Thiringer reserved to the insurer a right of subrogation and provided that
the insured should do nothing to prejudice such right. The Supreme Court agreed with the trial
court's conclusion that in the context of a general settlement involving automobile personal
injury protection the proceeds should be first applied toward the payment of the insured's
general damages and then, if any excess remains, toward the payment of the special damages
covered by personal injury protection insurance.
An insured may be considered fully compensated by a less-than-limits settlement with a
tortfeasor, despite reduction of its final recovery by his attorney’s fees, where he has settled with
full knowledge of his obligation to pay fees, and thus he had an obligation to reimburse his
insurer for its subrogated interest. 342 It also appears an insured must only be made whole for the
particular category of damages being sought by the insurance company, in order to allow the
insurance company’s subrogation rights. 343 The property damage subrogation does not relate to
the right of reimbursement for personal injuries under the policy.
Disputes between insureds and subrogating carriers with regard to the made-whole doctrine are
resolved on a case-by-case basis upon a consideration of “the equitable factors involved,
guided by the principle that a party suffering compensable injury is entitled to be made whole
but should not be allowed to duplicate his recovery.” 344 Washington law provides a number of
factors to be considered when resolving a subrogation or reimbursement dispute between an
insurer and its insured where the insured executes a general release with the tortfeasor:
335 th
Fields v. Farmers Ins. Co., 18 F.3d 831 (10 Cir. 1994).
336
Geraldine Simmons Collins v. BlueCross & BlueShield of Va., 193 S.E.2d 782, 784-785 (Va. 1973).
337
Mattson On Behalf of Mattson v. Stone, 648 P.2d 929 (Wash. App. 1982); Mahler v. Szucs, 957 P.2d
632 (Wash. 1998).
338
Skiles v. Farmers Ins. Co., Inc., 814 P.2d 666 (Wash. App. 1991).
339
Thiringer v. American Motorist Co., 588 P.2d 191 (Wash. 1978).
340
Id.
341
Id.
342
Peterson v. Safeco Ins. Co. of Ill., 976 P.2d 632 (Wash. App. 1999).
343
Mahler, supra.
344
Leader Nat'l Ins. Co. v. Torres, 779 P.2d 722, 723 (Wash. 1989).
Last Updated 11/26/2008 42

(1) knowledge of insureds and tortfeasors as to outstanding subrogation claims;
(2) extent of the prejudice to insurer's subrogation interests;
(3) desirability of encouraging settlements;
(4) possibility of sharp practices by tortfeasors, insureds or their insurance carriers; and
(5) general public policy that persons suffering compensable injuries are entitled to be
made whole. 345
While the insured is entitled to recoup his general damages from the tortfeasor before
subrogation is permitted, in doing so it may not do anything to prejudice the rights of the
insurer. 346 As explained by the court of appeals in British Columbia Ministry of Health v.
Homewood:
[T]o establish prejudice [the insurer] must show (1) the percentage of negligence of [each
of three tortfeasors]; (2) the total losses the plaintiff suffered; [and] (3) that the settlement
as a percentage of plaintiff's total injuries was less than the percentage of the settling
entities' comparative negligence. Only if the latter percentage exceeds the former will [the
insurer's] subrogation rights have been prejudiced .... 347
The holding in Thiringer was also construed by the Court of Appeals in Fisher v. Aldi Tire, Inc. to
allow the parties to the contract to modify subrogation standards developed at common law. 348
However, the language purporting to change the common law standards must be clear and
unambiguous.
A self-insured retention (SIR) of $100,000 paid by an insured under a CGL policy does not
constitute “primary insurance” for purposes of subrogation, according to the Washington Court
of Appeals. 349 Therefore, the CGL carrier was not be entitled to any portion of a third party
subrogation recovery unless and until the insured was “made whole” under Thiringer for the SIR
payment it had made.
WEST VIRGINIA
West Virginia strongly adheres to the made whole doctrine. 350 Under general principles of
equity, in the absence of statutory law or valid contractual obligations to the contrary, an insured
must be fully compensated for injuries or losses sustained before the subrogation rights of an
insurance carrier will arise. 351 West Virginia has held that parties may contract out of the made
whole doctrine in the terms of a policy or Plan. 352 When a jury renders a verdict and awards
damages, that award represents the amount necessary to make the insured or Plan beneficiary
whole. 353 It doesn’t matter if the insured values his case more than the jury did, the jury’s finding
345
Torres, supra.
346
B.C. Ministry of Health v. Homewood, 970 P.2d 381, 386 (Wash. Ct. App. 1999) (concluding that
general settlement involving health insurance should be apportioned first to general damages and then
any excess to special damages).
347
Homewood, supra.
348
902 P.2d 166 (Wash. App. 1995).
349
Bordeaux, Inc. v. American Safety Ins. Co, 186 P.3d 1188 (Wash. App. 2008).
350
Kanawha Valley Radiologists, Inc. v. One Valley Bank, 557 S.E.2d 277 (W.Va. 2001); Kittle v. Icard,
405 S.E.2d 456 (W. Va. 1991).
351
Bush v. Richardson, 484 S.E.2d 490 (W.Va. 1997).
352
Id; Kanawha Valley Radiologists, Inc., supra.
353
Bell v. Federal Kemper Ins. Co., 693 F. Supp. 446 (S.D.W.Va.1988).
Last Updated 11/26/2008 43

is binding and the insured is considered to be “made whole.” 354 West Virginia also holds that
when an insured settles a claim with the third party tortfeasor, the amount of damages
necessary to make the plaintiff whole is fixed by the settlement agreement, and the insured
cannot deny that he is made whole. 355
In determining whether an insured or Plan beneficiary has been made whole, the West Virginia
court should consider the following factors:
(1) the ability for the parties to prove liability;
(2) the comparative fault of the parties involved;
(3) the complexity of the issue;
(4) future medical expenses;
(5) the nature of the injury; and
(6) the tortfeasor’s assets beyond third party insurance coverage. 356
In Kittle v. Icard, the West Virginia Supreme Court of Appeals addressed the issue of whether
the West Virginia Department of Human Services (DHS) was entitled to be fully reimbursed for
medical expenses paid on behalf of an insured from the amount the insured received in
settlement from a tortfeasor. 357 DHS argued that the trial court erred when it applied the
common law made whole rule instead of Section 9-5-11 (1990). 358 According to DHS, the
statute abrogated common law equitable principles. The Supreme Court in Kittle agreed that the
West Virginia statute was applicable. However, the court was not persuaded that the use of the
term “subrogation” in the statute altered its common law meaning. According to the court, in the
absence of a clearly expressed legislative intent requiring otherwise, the term subrogation is to
be given its usual and ordinary meaning. Thus, the use of the term “subrogation” in a statute
merely grants the insurer a right of subrogation. 359 The extent to which that right may be
exercised, however, is to be guided by the principles of equity.
Despite the fact that Kittle was subsequently statutorily superseded, courts continue to apply its
rationale and holding in all forms of subrogation dispute. 360 Thus, in the absence of clear
statutory law or valid contractual arrangements to the contrary, an insured must be made whole
for losses sustained before the subrogation rights of the insurer can be exercised. General
subrogation language does not defeat application of the complete compensation rule. Only
contractual arrangements which clearly and expressly create an agreement to the contrary have
such an effect. 361
WISCONSIN
Not only has Wisconsin adopted the made whole rule, but it is sometimes considered to be the
“mother of all made whole states” because its early decisions on the made whole doctrine and
354
Id.
355
Bell v. Federal Kemper Ins. Co., 693 F. Supp. 446 (S.D. W.Va. 1988).
356
Provident Life & Acc. Ins. Co. v. Bennett, 483 S.E.2d 819 (W.Va. 1997).
357
Kittle, supra.
358
W.V. Code § 9-5-11 (1990) (grants Dept. of Health and Human Services subrogation rights).
359
But see Grayam v. Dep't of Health & Human Res., 498 S.E.2d 12, 16 (W. Va. 1997) (construing
amended statute to preclude application of made whole rule); Cart v. Gen. Elec. Co., 506 S.E.2d 96, 99
(W. Va. 1998) construing workers' compensation statute to abrogate common law made whole rule).
360
Kanawha Valley Radiologists v. One Valley Bank, N.A., 557 S.E.2d 277 (W. Va. 2001).
361 Id.
Last Updated 11/26/2008 44

its procedures with regard to determination of how and when an insured is made whole, have
been used as an example by a large number of other states. In Wisconsin, an insured must be
made whole before an insurer may recover anything from the tortfeasor. 362
When a made whole issue arises, Wisconsin holds a hearing referred to as a “Rimes hearing,”
in which a mini-trial is held. In this hearing, the court determines various items of damages
which a jury would have found to be sufficient to make the insured whole. 363 The test of being
made whole depends on whether the insured has been completely compensated for all types of
damages, including personal injury and property damage. 364 Although early decisions indicated
that if an insured settled with a third party, the subrogated carrier could still proceed against a
third party on its own subrogation claim, 365 where recent decisions have held that a subrogated
health insurer cannot recover subrogated amounts when an insured or Plan beneficiary settles
with the defendant without involving a subrogated carrier, but where the insured requests the
Rimes hearing and the subrogated carrier has an opportunity to participate, and the court
determines that the settlement did not make the insured whole. 366
While early decisions also determined that an insured was made whole when he received
compensation in a settlement agreement covering all his losses, less an amount corresponding
to his contributory negligence, 367 a later Supreme Court decision in an unusual “tie vote,”
obfuscated this result when three Justices voted in favor of granting a pro rata subrogation
recovery where contributory negligence was a factor, and three Justices held no subrogation
would be allowed where there was contributory negligence, because the insured could never be
totaling “made whole.” 368 The Wisconsin Supreme Court has also indicated, contrary to the rule
in the majority of other states, that the made whole doctrine can trump express plan provisions
to the contrary. 369
Until recently, the precise application of the made whole doctrine in death cases was still a
question mark in Wisconsin. In 2005, the Wisconsin Supreme Court issued a significant “made
whole” decision in which Gary Wickert argued on behalf of the subrogated insurer. In Petta v.
ABC Insurance Company, 370 Dayle Petta was killed in an auto accident which totally destroyed
her car. Petta was survived by her two adult children, who filed a wrongful death suit against the
defendant driver. Petta had insurance through Travco Insurance Company, which paid benefits
to its insured for the damages to her car, as well as medical and funeral expenses under its Med
Pay provisions. Travco sought a subrogation recovery of the property damage and Med Pay
benefits it had paid to Petta’s estate. The two adult Petta children settled for policy limits of
$250,000, plus an additional $30,000 paid by the defendant personally. As part of the
settlement, the Pettas agreed to indemnify the third party for any subrogation claim of Travco.
Travco acknowledged that the $280,000 did not make the Petta children “whole” for their
damages, but argued that the made whole doctrine should not apply because the Petta children
were not Travco “insureds.” Travco maintained that Rimes applied only between an insurer and
its insured, and therefore didn’t apply in wrongful death cases such as this.
362 Garrity v. Rural Mut. Ins. Co., 253 N.W.2d 512 (Wis. 1977).
363 Rimes v. State Farm Mut. Auto. Ins. Co., 316 N.W.2d 348 (Wis. 1982).
364 Valley Forge Ins. Co. v. Home Mut. Ins. Co., 396 N.W.2d 348 (Ct. of Appeals 1986).
365 Mutual Service Cas. Co. v. American Family Ins. Group, 410 N.W.2d 582 (Wis. 1987); Blue Cross &
Blue Shield United of Wis. v. Fireman’s Fund Ins. Co. of Wis., 411 N.W.2d 133 (Wis. 1987).
366 Schulte v. Frazin, 500 N.W.2d 305 (Wis. 1992).
367 Sorge v. Nat’l Car Rental Sys., Inc., 512 N.W.2d 505 (Wis. 1994).
368 Ives v. Coopertools, 559 N.W.2d 571 (Wis. 1997).
369 Drinkwater v. American Family Mut. Ins. Co., 714 N.W.2d 568 (Wis. 2006).
370 Petta v. ABC Ins. Co., 672 N.W.2d 146 (Wis. 2005).
Last Updated 11/26/2008 45

The Pettas brought a Rimes hearing and the trial court found that they had not been made
whole, denying Travco’s subrogation rights. Travco appealed and the Court of Appeals
reversed, holding that the made whole doctrine did not apply in wrongful death cases. The
Pettas appealed to the Wisconsin Supreme Court. The Supreme Court reversed the Court of
Appeals, holding that the made whole doctrine did apply in wrongful death cases. 371 The Court
held that equitable considerations controlled in subrogation situations, necessitating that
wrongful death plaintiffs be made whole before the insurance company of the deceased could
subrogate—even though the plaintiffs were not “insureds” of the subrogated carrier. The
Supreme Court negated Travco’s subrogation interest.
The Pettas also argued that they were entitled to receive the value of their mother’s destroyed
car, but Travco maintained that the made whole doctrine was not applicable here because the
car belonged to the mother, and no estate had ever been set up for her. The Court held that §
895.04(6) empowered the Pettas to control the settlement of any claims the estate had against
the defendant, and therefore, they could “waive and satisfy” the cause of action the estate had
against the defendant for the value of the insured vehicle, even though they were not the
“insured.”
The Court further held that the Petta children did not pay for the medical and funeral expenses
(Travco did), they had no ownership rights in those damages. However, the Court also went on
to declare that the claim for these damages was inseparable from the Pettas’ own claims,
Travco’s subrogation rights in these damages was extinguished because the Pettas were not
made whole.
Not all the made whole news out of Wisconsin is bad, however. In 2008, the Wisconsin
Supreme Court decided the case of Muller v. Society Insurance. 372 Muller involved a fire which
caused $697,981.58 in damage to Bruce and Karen Muller’s sporting goods store in Milltown,
Wisconsin. The fire was caused by the negligence of an electrician named George Jerrick,
whose liability carrier, United Fire and Casualty, had $1 million limits. The Muller’s’ property
insurer, Society Insurance Company, paid out its policy limits of $407,378.88—leaving the
Mullers with an uninsured loss of $290,602.30. The Mullers sued Jerrick and United to recover
this uninsured loss and Society entered the lawsuit and assisted, claimed subrogation rights. At
mediation, Society reached a tentative settlement with Jerrick and United for $190,000,
condition upon the Mullers settling with Jerrick or resolving the case at trial. The Mullers later
settled their claim for $120,000—$170,602.70 less than their uninsured loss. The insured was
clearly not made whole.
The Mullers asked the court to void Society’s settlement to the extent that the Mullers had not
been made whole under the Rimes doctrine in Wisconsin—a 1982 case which provides for a
hearing to determine whether an insured has been whole before a subrogation claim is allowed.
The Mullers wanted to recover their $ 170,602.70 shortfall out of the $ 190,000 Society
subrogation settlement. The trial court held that because the Mullers and Society were in
competition for the “limited” pool of $310,000 (combination of both settlements), and required
Society to disgorge part of their subrogation recovery in order to make the Mullers whole.
Society appealed. The Court of Appeals reversed the trial court, holding that the $1 million
liability policy was “far more than adequate to cover all the claims.” It stated that the Mullers
371 Id.
372 Muller v. Society Insurance, 750 N.W.2d 1 (Wis. 2008) (Amicus Brief on behalf of the National
Association of Subrogation Professionals [NASP] filed by Matthiesen, Wickert & Lehrer, S.C.).
Last Updated 11/26/2008 46

“made a conscious choice to accept less than their losses…[that]…cannot plausibly be tied to
any limited funds.” The Mullers then appealed to the Wisconsin Supreme Court. The Wisconsin
Supreme Court affirmed the Court of Appeals, holding for the first time that the made whole
doctrine does not apply in situations where the insured settles with the tortfeasor for an amount,
which when combined with the carrier’s subrogation interests, does not exceed the limits of
available third party liability limits.
Society was allowed to keep its entire subrogation recovery from the third party. The court wrote
a long majority opinion, which walked through the long history of the made whole doctrine in
Wisconsin. The court did not abandon the equitable basis of subrogation and did not backtrack
from its position that the made whole doctrine cannot be contracted away via policy language.
leaves some unanswered made whole questions. Some opponents of subrogation may argue
that the case only applies to situations where the insured has settled independently of the
subrogated insurer. They might argue that the made whole doctrine should still apply to a
settlement made by the insured to which a subrogated insurer lays claim to a portion in
satisfaction of its rights of reimbursement or subrogation. However, the Muller decision seems
clear that, under any circumstances, the made whole doctrine will not apply if the following
conditions exist:
(1) The subrogated insurer has fully satisfied its obligations to its insured under an insurance
contract;
(2) The insured has had an opportunity to settle its claim with the tortfeasor and the
tortfeasor’s liability insurer;
(3) The pool of settlement funds available to the insureds exceeds the total claims of both the
insureds and the subrogated insurer; and
(4) The insured settles its claim with the tortfeasor, even though the settlement, together with
the subrogated insurer’s policy claim payment, does not satisfy the insured’s total claim.
The key is the existence of competition for a limited pool of funds. We know that this decision
doesn’t stand for the proposition that an insured is made whole by merely settling a case. That
was made clear in Rimes. But the Muller decision seems to be indicating that where the liability
limits of the tortfeasor exceed the combined claims of the insured and subrogated insurer and
the insured settles for a lesser amount anyway, the made whole doctrine will not apply.
The Muller court also noted that as part of its settlement, the Mullers did not indemnify the
tortfeasor or its insurer against the subrogated claim, as sometimes occurs in settlements. The
Supreme Court did state that such an indemnification agreement “limits available funds,”
because a liability carrier will always attempt to limit its exposure and will be more willing to
settle with the insured if it can eliminate the subrogated carrier’s rights of recovery and/or
reimbursement in the process. Therefore, if the settlement is not made whole by a settlement
that includes an indemnification agreement, the insured has claimed the available pool of
settlement funds, and the insurer may be barred from subrogating as a result of the made whole
doctrine
Society was held entitled to act on its subrogation rights so long as it recognized the priority of
its insured to compete for available funds. Had there been an insufficient pool of funds, Society
would have been out of luck. In language that should be quoted by subrogation professionals
regularly from now on, the court in Muller stated:
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Where policy limits are sufficient to cover all related claims, the insured cannot settle
for less than policy limits and then argue that “the pie was not big enough” to make him
whole. 373
This should be the rule of the case that subrogation professionals argue, leaving it to the other
side to parse the individual facts of the case and distinguish their case from the facts in Muller.
WYOMING
There are no reported decisions dealing with the made whole doctrine in the State of Wyoming.
To make matters worse, the 10 th Circuit, in which Wyoming sits, has yet to decide whether the
10 th Circuit will adopt the made whole doctrine under federal common law for interpretation of
ERISA Plans. 374 The 10 th Circuit recognized the made whole doctrine as a creature of equitable
insurance law wherein an insured is entitled to receive recovery for a loss and a subrogated
carrier is not entitled to subrogate until the insured has been made whole for all of its damages,
yet it failed to adopt this doctrine. 375
373 Id.
374 Alves v. Silverado Foods, Inc., 6 Fed. Appx. 694 (10 th Cir. 2001).
375 Id.
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